PAWNMART INC, SB-2, 1997-10-23

PAWNMART INC
SB-2, 1997-10-23

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997

REGISTRATION NO. 333-
================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

PAWNMART, INC.
(Name of small business issuer in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5940 75-2520896
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

301 COMMERCE STREET, SUITE 3600
FORT WORTH, TEXAS 76102
(817) 335-7296
(Address and telephone number of principal executive offices and principal place
of business)
---------------------

CARSON R. THOMPSON
PAWNMART, INC.
301 COMMERCE STREET, SUITE 3600
FORT WORTH, TEXAS 76102
(817) 335-7296
(Name, address and telephone number of agent for service)
---------------------

Copies to:

<TABLE>
<S> <C>
JAKES JORDAAN, ESQ. DAVID G. MCLANE, ESQ.
JORDAAN HOWARD & PENNINGTON, P.L.L.C. GARDERE & WYNNE, L.L.P.
300 CRESCENT COURT, SUITE 1670 1601 ELM STREET, SUITE 3000
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
(214) 871-6550 (214) 999-3000
</TABLE>

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the date this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ------------------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C> <C> <C>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share(2).............................. 2,300,000 $5.00 $11,500,000 $3,484.85
- ---------------------------------------------------------------------------------------------------------------------
Underwriter's warrants(3)............... 200,000 $.001 $200 (4)
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Issuable Upon Exercise of
Underwriter's warrants(5)............. 200,000 $6.00 $1,200,000 $ 363.64
- ---------------------------------------------------------------------------------------------------------------------
Total......................... $3,848.49
=====================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 300,000 shares of Common Stock that may be purchased by the
Underwriter from the Company to cover over-allotments, if any.
(3) The Underwriter's Warrants entitle the Underwriter's to purchase shares of
Common Stock equal to 10% of the total number of shares sold pursuant to the
Registration Statement, exclusive of any shares subject to the Underwriter's
over-allotment option.
(4) Pursuant to Rule 457(g), no registration fee is payable.
(5) Pursuant to Rule 416, this Registration Statement also covers an
indeterminate number of additional securities issuable upon future anti-
dilution adjustments in accordance with the terms of the Underwriter's
Warrants.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED NOVEMBER , 1997

2,000,000 SHARES

PAWNMART, INC.

COMMON STOCK
---------------------
All of the 2,000,000 shares of common stock, $.01 par value per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by PawnMart,
Inc. (the "Company"). Prior to this Offering, there has been no public market
for the Company's Common Stock. It is currently anticipated that the initial
public offering price will be $5.00 per share. See "Underwriting" for
information relating to the method of determining the initial public offering
price. The Company has been approved for listing of the Common Stock on the
American Stock Exchange under the trading symbol "PMT" subject to notice of
issuance.
---------------------
THESE SECURITIES ARE SPECULATIVE IN NATURE, INVOLVE A HIGH DEGREE OF RISK
AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD
THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" ON PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

================================================================================

<TABLE>
<S> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
Per Share(2)............................ $ $ $
- --------------------------------------------------------------------------------------------------------------
Total................................... $ $ $
==============================================================================================================
</TABLE>

(1) Does not include additional compensation to be received by the Underwriters
in the form of (i) non-accountable expense allowance of 1.5% of the gross
proceeds of the Offering and (ii) warrants (the "Underwriter Warrants") of
up to 200,000 shares of Common Stock at a price equal to 120% of the initial
public offering price per share, exercisable over a four-year period
commencing on the date of this Prospectus. In addition, the Company has
agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting offering expenses estimated to be approximately $350,000
payable by the Company.
(3) The Company has granted to the Underwriter a 45-day option to purchase up to
an additional 300,000 shares of Common Stock solely to cover
over-allotments, if any, on the same terms and conditions as the shares
offered hereby. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to the Company
will be $ , $ and $ , respectively. See
"Underwriting."
---------------------
The shares of Common Stock are offered by the Underwriter named herein,
subject to receipt and acceptance by it and subject to its right to reject any
order in whole or in part. It is expected that delivery of such shares will be
made at the offices of ComVest Partners, Inc. ("ComVest"), Dallas, Texas, on or
about , 1997.
---------------------
COMVEST PARTNERS, INC.

The date of this Prospectus is , 1997.
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE OR
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITER. FOR A DESCRIPTION OF THESE
ACTIVITIES SEE "UNDERWRITING."
---------------------

ADDITIONAL INFORMATION

The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form SB-2, (including any amendments thereto, the
"Registration Statement") with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and the exhibits and schedules thereto. Statements made
in this Prospectus regarding the contents of any contract or document filed as
an exhibit to the Registration Statement are not necessarily complete and, in
each instance, reference is hereby made to the copy of such contract or document
so filed. Each such statement is qualified in its entirety by such reference.
The Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge and copied upon payment of the charges prescribed by
the Commission at the Public Reference Room of the Commission, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a website
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission at
http://www.sec.gov.
---------------------

As a result of this Offering, the Company will become subject to the
reporting requirements of the Exchange Act, and in accordance therewith will
file periodic reports, proxy statements and other information with the
Commission. The Company will furnish its stockholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and with quarterly reports for the first three quarters of each
year containing unaudited financial information.
---------------------

The Company has applied to list the Common Stock on the American Stock
Exchange. If the Company's application is accepted, then reports, proxy
statements and other information concerning the Company will be available for
inspection at the principal office of the American Stock Exchange at 86 Trinity
Place, New York, New York, 10006. There is no assurance the Common Stock will be
accepted for listing.
<PAGE> 4

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Except as
otherwise noted herein, all information in this Prospectus (i) assumes a public
offering price of $5.00 per share; (ii) assumes no exercise of the Underwriter's
over-allotment option; (iii) gives effect to the conversion of all outstanding
shares of the Company's $.50 Series A Convertible Preferred Stock, the Company's
Series B Convertible Preferred Stock, the Company's Series C Convertible
Preferred Stock and the 12% Series D Convertible Exchangeable Preferred Stock
into an aggregate of 1,817,931 shares of Common Stock, all of which will occur
automatically upon completion of this Offering (the "Preferred Stock
Conversion"); (iv) gives effect to the conversion of $9.52 million principal
amount of the Company's 14% Convertible Subordinated Debentures due June 30,
1999, June 30, 2000 and January 31, 2001 into an aggregate of 2,380,000 shares
of Common Stock, all of which will occur automatically upon completion of this
Offering (the "Debenture Conversion"); (v) gives effect to a 1-for-2 reverse
stock split of the Company's outstanding shares of Common Stock (the "Reverse
Stock Split"); and (vi) assumes no exercise or conversion of outstanding options
or warrants. See "Description of Capital Stock," "Underwriting" and Notes 5, 7,
8, 10, 11 and 12 of Notes to Audited Consolidated Financial Statements.

THE COMPANY

GENERAL

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 advances 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. To compensate it for the
use of the funds advanced, the Company contracts for a pawn service charge. In
the event that the customer does not redeem the pledged property, it becomes
inventory available for sale by the Company to its retail customers. Currently,
the Company owns and operates 19 stores, of which 11 are located in Georgia,
five in Alabama, two in North Carolina and one in Texas.

GROWTH STRATEGY

The pawnshop industry is a multi-billion dollar, rapidly growing industry
and is highly fragmented. Of the approximately 13,000 pawnshops in the United
States, the industry's four public companies collectively own approximately five
percent. The Company's strategic objective is to capitalize upon growth
opportunities afforded by this highly fragmented industry through a roll-out of
its stores. To achieve its strategic objective, the Company has adopted the
following strategy:

- 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 and utilize extensive training programs for employees and
extensive operating controls.

- STRATEGIC MARKET POSITIONING. The Company seeks to establish 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.

creating a successful PAWNMART(TM) 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(TM) has a
similar "look and feel."

- LEVERAGE THE COMPANY'S TARGETED DATABASE MARKETING SEGMENTATION
SYSTEM. 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 be
utilized for customer acquisition, retention, promotion and store site
selection.

- CONTINUED UTILIZATION OF 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 95(TM) 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.

- RAPID EXPANSION IN METROPOLITAN AREAS IN STATES WITH FAVORABLE PAWN
REGULATION. 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 regulation.

- FRANCHISE OPERATIONS IN SMALLER MARKETS. The Company intends to sell
PAWNMART(TM) 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.

EXPERIENCED SPECIALTY RETAIL MANAGEMENT TEAM AND BOARD OF DIRECTORS

Carson Thompson, the Company's Chief Executive Officer and Chairman of the
Board, served as President and Chief Executive Officer for The Bombay Company,
Inc. during its roll-out phase. Also, Robert Bourland, the Company's Chief
Operating Officer and Director, worked for Tandy Corporation for twenty years
serving as Senior Vice President -- Managing Director, Tandy U.K. operations and
other management capacities. Between 1979 and 1985, he acted as Tandy's
Divisional Vice President responsible for 1,200 Radio Shack stores. As such,
these executives have, collectively, more than 50 years of specialty retail and
management experience.

The Company's Board of Directors includes Robert Camp who has 19 years of
experience with Pier 1 Imports, Inc., including five years as Chief Executive
Officer or Chief Operating Officer. Additional Directors include James Berk, who
is Vice Chairman and Chief Executive Officer of APC, Inc. and has served as
President and Chief Executive Officer of Bizmart, Inc.; Monty Standifer, who
served as Chief Financial Officer of Bizmart, Inc. and is presently the Chief
Financial Officer of Gadzooks, Inc. (NASDAQ:GADZ); and Mark Kane, who founded,
and served as President and Chief Executive Officer of CD Warehouse, Inc.
(NASDAQ:CDWI). See "Management -- Directors and Executive Officers." The Company
intends to capitalize upon the specialty retail experience and talents of these
individuals to expand rapidly in a fragmented industry.
4
<PAGE> 6

THE OFFERING

Common Stock Offered by the
Company..................... 2,000,000 shares

Common Stock to be Outstanding
After the Offering.......... 9,120,498 shares(1)

Use of Proceeds............... The Company intends to use the net proceeds of
this offering to establish new stores, repay
indebtedness and for working capital and other
general corporate purposes.

Proposed American Stock
Exchange Symbol............... "PMT"
- ---------------

(1) See "Capitalization."
5
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JANUARY 28, JANUARY 26, JULY 28, JULY 27,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SELECTED STATEMENTS OF OPERATIONS DATA:
REVENUES:
Pawn service charges................... $ 1,337,618 $ 2,291,104 $ 984,927 $ 1,380,096
Merchandise sales...................... 3,051,678 5,522,731 2,449,530 3,104,876
Other income........................... 34,206 89,567 1,071 29,154
----------- ----------- ----------- -----------
Total revenue.......................... 4,423,502 7,903,402 3,435,528 4,514,126
Less cost of sales..................... (1,941,489) (3,527,670) (1,540,326) (2,088,683)
----------- ----------- ----------- -----------
Gross profit........................... 2,482,013 4,375,732 1,895,202 2,425,443
EXPENSES:
Operating expenses..................... 2,625,716 3,863,843 1,629,444 1,786,962
Interest............................... 720,301 1,360,511 598,355 869,787
Depreciation and amortization.......... 375,023 495,125 255,883 255,465
Administrative......................... 1,588,600 1,712,568 959,578 1,012,339
----------- ----------- ----------- -----------
Total expenses......................... 5,309,640 7,432,047 3,443,260 3,924,553
----------- ----------- ----------- -----------
Net loss............................... $(2,827,627) $(3,056,315) $(1,548,058) $(1,499,110)
=========== =========== =========== ===========
Pro forma loss per common share(4)..... $ (0.42) $ (0.28) $ (0.15) $ (0.10)
=========== =========== =========== ===========
Common and common equivalent shares
outstanding(4)....................... 6,141,658 7,485,484 7,388,360 7,742,980
</TABLE>

<TABLE>
<CAPTION>
AT JULY 27, 1997
---------------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
----------- ------------ --------------
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Loans............................................... $ 2,365,740 $2,365,740 $ 2,365,740
Inventories, net.................................... 2,117,289 2,117,289 2,117,289
Working capital..................................... 3,506,775 3,506,775 11,404,775
Total assets........................................ 7,262,367 6,683,288 15,333,288
Stockholders' equity (deficit)(1)................... (4,953,328) 3,987,593 12,637,593
OTHER DATA:
Stores owned........................................ 19
Average age of stores............................... 2.25 years
</TABLE>

- ---------------

(1) See "Capitalization."

(2) Gives effect to the Preferred Stock Conversion and the Debenture Conversion.

(3) Pro forma as adjusted to give effect to (i) the sale of 2,000,000 shares of
Common Stock by the Company, (ii) the application of the net proceeds
therefrom of approximately $8.65 million and (iii) the retirement of
$2,142,000 in debt of which $1,390,000 was current at July 27, 1997. See
"Use of Proceeds" and "Capitalization."

(4) Pro forma loss per common share is determined based on the weighted average
number of common and common equivalent shares outstanding during each period
giving effect to the Reverse Stock Split, the Preferred Stock Conversion,
the Debenture Conversion and the exercise or conversion of outstanding
options and warrants. See the consolidated financial statements and the
notes thereto of the Company included elsewhere in the Prospectus.
6
<PAGE> 8

RISK FACTORS

An investment in the shares of Common Stock offered hereby is speculative
and involves a high degree of risk, including the risk factors described below.
In addition to the other information presented in this Prospectus, each
prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company and this Offering before
making an investment decision. This Prospectus contains certain forward-looking
statements regarding the Company's business and prospects that are based upon
numerous assumptions about future conditions which may ultimately prove to be
inaccurate and actual events and results may materially differ from anticipated
results described in such statements. The Company's ability to achieve such
results is subject to certain risks and uncertainties, such as those risks
detailed in this section, and other risks detailed throughout this Prospectus.
These forward-looking statements represent the Company's judgment as of the date
of the filing of this Prospectus. The Company disclaims, however, any intent or
obligation to update these forward-looking statements.

LACK OF PROFITABILITY, POTENTIAL LOSSES

From its inception on January 13, 1994 through July 27, 1997, the Company
has experienced aggregate losses of $9,037,206. Further, a key element of the
Company's strategy consists of establishing (rather than acquiring) multiple
PAWNMART(TM) stores meeting the Company's required store size, configuration,
and site selection requirements in regional and local markets. This strategy may
result in continued net losses for the Company during its roll-out phase due to
start-up losses associated with the anticipated high number of new stores. The
Company's audited consolidated financial statements include a "going concern"
explanatory paragraph, and there can be no assurance that the Company will be
able to achieve profitability. Results of operations in the future will be
influenced by numerous factors including, among others, new store expansions,
the ability of the Company to manage its growth and maintain the quality of its
personnel, and the ability of the Company to implement its strategic plan.
Potential investors should be aware of the problems, delays, expenses and
difficulties encountered by any company in an expansion stage, many of which may
be beyond the Company's control. These include, but are not limited to,
unanticipated regulatory compliance, marketing problems and intense competition
that may exceed current estimates. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."

MANAGEMENT OF GROWTH

The Company plans to expand its business through a roll-out of new
PAWNMART(TM) stores. To a significant extent, the Company's future success will
be dependent upon its ability to engage in a successful expansion program and
will be dependent, in part, upon its ability to secure suitable sites for its
new stores, obtain adequate inventory for its new stores, maintain adequate
financial controls and reporting systems to manage a larger operation, and to
obtain additional capital upon favorable terms. There can be no assurance that
the Company will be able to successfully implement its planned expansion,
finance its growth or manage the resulting larger operation.

AVAILABILITY OF QUALIFIED STORE MANAGEMENT PERSONNEL

The Company's ability to expand may also be limited by the availability of
qualified store management personnel. While the Company seeks to train existing
qualified personnel for management positions and to create attractive
compensation packages to retain existing management personnel, there can be no
assurance that sufficient qualified personnel will be available to satisfy the
Company's needs with respect to its planned expansion.

COMPETITION

7
<PAGE> 9

sales include numerous retail and discount stores. Many competitors have greater
financial resources than the Company, including Cash America International, Inc.
and EZCORP, Inc. These competitive conditions may adversely affect the Company's
revenues, profitability and ability to expand.

GOVERNMENT REGULATION

The Company's lending operations are subject to extensive regulation,
supervision and licensing under various federal, state and local statutes,
ordinances and regulations. These statutes prescribe, among other things,
service charges a pawnshop may charge for lending money and the rules of conduct
that govern an entity's ability to maintain a pawnshop license. With respect to
firearm and ammunition sales, a pawnshop must comply with the regulations
promulgated by the United States Department of the Treasury-Bureau of Alcohol,
Tobacco and Firearms. Governmental regulators have broad discretionary authority
to refuse to grant a license or to suspend or revoke any or all existing
licenses of licensees under common control if it is determined that any such
licensee has violated any law or regulation or that the management of any such
licensee is not suitable to operate pawnshops. In addition, there can be no
assurance that additional state or federal statutes or regulations will not be
enacted at some future date which could inhibit the ability of the Company to
expand, significantly decrease the service charges it can charge for lending
money, or prohibit or more stringently regulate the sale of certain goods, such
as firearms, any of which could significantly adversely affect the Company's
prospects. The Company's ability to open new stores in other states could be
affected by the enactment of state or local legislation, similar to current
Texas legislation, which requires a finding of public need and probable
profitability by the Texas Consumer Credit Commissioner as a condition to the
issuance or activation of any new pawnshop license in Texas counties having a
population of more than 250,000. In addition, the present statutory and
regulatory environment of some states renders expansion into those states
impractical. For instance, certain states require public sale of forfeited
collateral or do not permit service charges sufficient to make pawnshop
operations profitable.

DEPENDENCE ON KEY MANAGEMENT

The Company relies on the business and technical expertise of its executive
officers and certain other key employees, particularly its Chief Executive
Officer, Carson Thompson and its Chief Operating Officer, Robert Bourland. The
loss of the services of any of these individuals could have a material adverse
effect on the Company. No assurance can be given that their services will be
available in the future. The Company's success will also be dependent on its
ability to attract and retain additional qualified management personnel. See
"Management."

RISKS RELATED TO FIREARM SALES

The Company has not, and, at present, the Company does not intend to engage
in the sale of handguns or assault rifles to the public. The Company does
wholesale handguns and assault rifles to licensed firearm dealers. The Company
has engaged in the sale of sporting rifles to the public leaving it open to the
risk of lawsuits from persons who may claim injury as a result of an improper
sale. No such claims have been asserted against the Company as of the date
hereof. The Company does maintain insurance covering potential risks related to
the sale of firearms.

RISKS RELATED TO AUTOMOBILE TITLE LOANS

Alabama and Georgia pawn regulations allow the Company to advance funds
secured by automobile titles. Approximately 9% of the Company's total revenues
for the six months ended July 27, 1997 were related to pawn service charges
generated from such advances. The adoption of additional, or the revision of
existing, laws and regulations impacting the Company's ability to advance funds
against automobile titles could have a material adverse effect on the Company's
business. In addition, the Company could be subject to consumer claims and
litigation seeking damages based upon wrongful repossession of automobiles.

8
<PAGE> 10

NO TRADEMARK PROTECTION

The Company has not been issued any registered trademark for its
"PAWNMART(TM)" or "PAWNLINK(TM)" trade names. No assurance can be given that the
Company will be successful in obtaining any trademarks, or that the trademarks,
if obtained, will afford the Company any competitive advantages.

SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL ADVERSE EFFECT ON MARKET PRICE OF
COMMON STOCK

Sales of shares of Common Stock in the public market, including "restricted
shares" first becoming eligible for resale following this Offering, could
adversely affect prevailing market prices. As of the date of this Prospectus,
there were outstanding on a pro forma basis 7,120,498 shares of Common Stock,
all of which shares were "restricted securities" under applicable securities
laws. Additional shares of Common Stock may become eligible for sale in the
public market from time to time upon exercise of warrants and stock options. See
"Description of Capital Stock -- Shares Eligible for Future Sale."

LIMITED UNDERWRITING EXPERIENCE

ComVest Partners, Inc., the Underwriter, has participated in a limited
number of public equity offerings as an underwriter. Prospective purchasers of
the securities offered hereby should consider this limited experience in
evaluating this Offering. See "Underwriting."

NO DIVIDENDS

The Company has not paid any cash or other dividends on its Common Stock
and does not expect to declare or pay any cash dividends in the foreseeable
future. See "Dividend Policy."

LACK OF PRIOR MARKET; VOLATILITY OF SECURITIES PRICES

There has been no prior market for any of the securities of the Company and
there can be no assurance that an active trading market will develop after this
Offering, or if developed, that a trading market will be sustained. The initial
public offering price will be determined by negotiations between the Company and
the Underwriter. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The market price
for the Common Stock could be volatile and no assurances can be given that the
market price of the Common Stock will not decline below the initial public
offering price. In addition, factors such as market conditions in the pawnshop
industry and general perceptions of emerging growth companies and rumors
relating to the Company or its competitors may also have a significant impact on
the market price of the Common Stock. Further, the stock market has experienced
volatility that has particularly affected the market prices of equity securities
of many companies in an expansion stage. Price volatility has often been
unrelated to the operating performance of such companies. These market
fluctuations may adversely affect the price of the Common Stock.

POSSIBLE DELISTING FROM THE AMERICAN STOCK EXCHANGE

Although the Company's application for listing of the Common Stock on the
American Stock Exchange has been approved subject to notice of issuance, there
can be no assurance that an active trading market will develop or, if developed,
that it will be maintained. In addition, there can be no assurance that the
Company will in the future meet the maintenance criteria for continued quotation
of the Common Stock on the American Stock Exchange. The maintenance criteria for
the American Stock Exchange include, among other things, stockholders' equity of
at least $2,000,000, a public float of at least 200,000 shares (exclusive of
shares held by officers, directors, controlling stockholders and other
restricted shares) together with a minimum of 300 public holders, and an
aggregate market value of shares publicly held of $1,000,000. The American Stock
Exchange may also delist the Company's Common Stock in the event the Common
Stock sells for a substantial period of time for a low price per share. If the
Company were removed from listing on the American Stock Exchange, trading, if
any, in the Common Stock would thereafter have to be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
the NASD's OTC Electronic

9
<PAGE> 11

Bulletin Board. As a result, an investor would find it more difficult to dispose
of, and to obtain accurate quotations as to the value of, such securities.

CERTAIN ANTI-TAKEOVER EFFECTS

Certain provisions of the Company's Restated Certificate of Incorporation
and By-laws could prohibit or delay mergers or other takeover or change in
control attempts with respect to the Company and, accordingly, may discourage
attempts to acquire the Company. These provisions include: (i) a classified
Board of Directors; (ii) a prohibition on stockholder action through written
consents; (iii) a requirement that special meetings of stockholders be called
only by the Board; (iv) advance notice requirements for stockholder proposals
and nominations; (v) limitations requiring the affirmative vote of holders of at
least 66 2/3% of the total votes eligible to be cast in the election of
directors to amend, alter or repeal the Company's Restated Certificate of
Incorporation and By-laws; and (vi) the authority of the Board to issue
preferred stock with such terms as the Board may determine without stockholder
approval. The Company will also be afforded the protections of Section 203 of
the Delaware General Corporation Law, which could have similar effects. See
"Description of Capital Stock."

DILUTION

Purchasers of the Common Stock will experience immediate and substantial
dilution of $3.59 (72%) per share between the pro forma net tangible book value
per share of Common Stock after the Offering and the assumed initial public
offering price of $5.00 per share. See "Dilution."

OUTSTANDING OPTIONS AND WARRANTS; RISK OF FURTHER DILUTION

As of the date of this Prospectus, the Company has outstanding warrants to
purchase a total of 323,677 shares of Common Stock at an exercise price of $4.80
per share and outstanding options to purchase a total of 468,200 shares of
Common Stock at an exercise price of $2.50 per share. The price that the Company
would receive for its Common Stock upon exercise of such options or warrants may
be significantly less than the value of, or market price for, the Common Stock
at the time such options or warrants are exercised. To the extent that any such
options or warrants are exercised, the interests of the Company's stockholders
may be diluted proportionately.

LIMITATIONS ON DIRECTOR LIABILITY

The Company's Restated Certificate of Incorporation provides, as permitted
by the Delaware General Corporation Law, that a director of the Company shall
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, with certain exceptions. These
provisions may discourage stockholders from bringing suit against a director for
breach of fiduciary duty and may reduce the likelihood of derivative litigation
brought by stockholders on behalf of the Company against a director. In
addition, the Company's Restated Certificate of Incorporation and By-laws
provide for mandatory indemnification of directors and officers to the fullest
extent permitted by Delaware law. In addition, the Company has entered into
indemnification agreements pursuant to which the Company is obligated to advance
litigation costs and indemnify its directors and officers to the fullest extent
permitted by Delaware law. See "Description of Capital Stock -- Limitations on
Liability and Indemnification of Officers and Directors."

AUTHORIZATION OF PREFERRED STOCK

The Company's Restated Certificate of Incorporation authorizes the issuance
of up to 10,000,000 shares of preferred stock with such rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
under the Restated Certificate of Incorporation, the Board of Directors may,
without stockholder approval, issue preferred stock with dividend, liquidation,
conversion, voting, redemption or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. The
issuance of any shares of preferred stock having rights superior to those of the
Company's

10
<PAGE> 12

Common Stock may result in a decrease of the value or market price of the Common
Stock and could further be used by the Board as a device to prevent a change in
control of the Company. Holders of the preferred stock may have the right to
receive dividends, certain preferences in liquidation and conversion rights.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company are estimated to be approximately $8.65
million after deducting underwriting discounts and estimated offering expenses.

The following table sets forth the anticipated uses of the net proceeds
from this offering:

<TABLE>
<CAPTION>
<S> <C>
Capital expenditures for new store development........... $6,450,000
Repayment of indebtedness(1)............................. 2,142,000
Working capital and other general corporate purposes..... 58,000
----------
Total uses..................................... $8,650,000
==========
</TABLE>

- ---------------

(1) Includes (i) $1,390,000 in 15% notes payable issued by the Company to
various individuals to mature on March 31, 1998, (ii) $278,000 in 15% notes
payable issued by the Company to various individuals to mature on March 31,
2000 and (iii) $474,000 in 15% notes payable issued by the Company to
various individuals to mature on December 31, 2000, the proceeds of which
were used to fund capital expenditures for the development of two additional
stores.

The exact allocation of the proceeds for such purposes and the timing of
such expenditures may vary significantly depending upon numerous factors,
including the number of stores to be developed by the Company. Pending the
application of such proceeds, the Company intends to invest the net proceeds of
this offering in short-term, investment-grade securities. The Company estimates
that such proceeds will be sufficient to fund such expenditures and other cash
requirements for at least the next 12 months. However, the time periods during
which the proceeds will be invested in such securities may vary significantly
depending upon a number of factors, and no assurances can be given in this
regard. Although the Company has no present commitments, agreements or
understandings with respect to any acquisitions, the Company may use a portion
of the net proceeds to acquire additional stores or other pawnshop companies.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DIVIDEND POLICY

The Company has not paid any cash dividends since its inception and for the
foreseeable future intends to follow a policy of retaining all of its earnings,
if any, to finance the development and continued expansion of its business.
There can be no assurance that dividends will ever be paid by the Company. Any
future determination as to payment of dividends will depend upon the Company's
financial condition, results of operations and such other factors as the Board
of Directors deems relevant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

11
<PAGE> 13

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company, (i) on an actual basis; (ii) on a pro forma basis after giving effect
to the Preferred Stock Conversion, the Debenture Conversion and the Reverse
Stock Split; and (iii) on an as adjusted basis to additionally reflect the
issuance of 2,000,000 shares of Common Stock offered by the Company and the
application of the estimated net proceeds therefrom. The following table should
be read in conjunction with the respective consolidated financial statements and
notes thereto of the Company included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT JULY 27, 1997
-----------------------------------------
ACTUAL PRO FORMA AS ADJUSTED(1)
------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term notes payable, net of current installments.... $10,272 $ 752 $ --
Stockholders' equity (deficit):
Common stock, $0.01 par value(2)...................... 28 69 89
Preferred stock, $0.01 par value(3)................... 35 -- --
Additional paid-in capital............................ 4,086 13,021 21,651
Accumulated deficit................................... (9,037) (9,037) (9,037)
Less treasury stock................................... (65) (65) (65)
------- ------- -------
Total stockholders' equity (deficit).................... (4,953) 3,988 12,638
------- ------- -------
Total capitalization............................... $ 5,319 $ 4,740 $12,638
======= ======= =======
</TABLE>

- ---------------

(1) Does not include: (i) 323,677 shares of Common Stock which may be issued
upon exercise of currently outstanding Common Stock purchase warrants issued
to broker/dealers in connection with the private placement of the Company's
securities; and (ii) 200,000 shares of Common Stock issuable upon exercise
of the Underwriter's Warrants, and (iii) 468,200 shares of Common Stock
which may be issued upon exercise of currently outstanding Common Stock
options issued under the 1997 PawnMart, Inc. Employee Stock Option Plan.

(2) At July 27, 1997, 20,000,000 shares of Common Stock were authorized,
2,821,317 shares were issued and outstanding, 6,920,373 shares were issued
and outstanding (pro forma); and 8,920,373 shares were issued and
outstanding (pro forma as adjusted).

(3) At July 27, 1997, 10,000,000 shares of preferred stock were authorized, and
3,493,112 shares were issued and outstanding.

12
<PAGE> 14

DILUTION

The pro forma net tangible book value of the Company at July 27, 1997 was
$3,894,803, or $0.56 per share. "Pro forma net tangible book value per share"
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding on a pro forma basis. After
giving effect to the sale by the Company of 2,000,000 shares of Common Stock
(based upon an assumed public offering price of $5.00 per share and after
deduction of offering expenses and the Underwriter's discount), the pro forma
net tangible book value of the Company at July 27, 1997 would have been
$12,544,803, or $1.41 per share, representing an immediate increase in net
tangible book value of $.85 per share to existing stockholders and an immediate
dilution of $3.59 per share to the persons purchasing shares at the initial
public offering price ("New Investors"). The following table illustrates the per
share dilution in net tangible book value per share to New Investors.

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............. $5.00
Pro forma net tangible book value per share................. $0.56
Increase per share attributable to New Investors............ $0.85
Pro forma net tangible book value after the Offering........ 1.41
-----
Dilution of net tangible book value to New Investors........ $3.59
=====
</TABLE>

The following table summarizes at October 20, 1997 the difference between
existing stockholders and New Investors with respect to the number of shares
purchased from the Company, the total consideration paid to the Company and the
average price paid per share (for New Investors, at the assumed initial public
offering price):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders............. 7,120,498 78.1% $13,561,671 57.6% $1.90
New Investors..................... 2,000,000 22.9% 10,000,000 42.4% $5.00
--------- ----- ----------- -----
Total................... 9,120,498 100.0% $23,561,671 100.0%
========= ===== =========== =====
</TABLE>

The computations in both of the foregoing tables assume no exercise of
outstanding employee stock options and warrants or of the Underwriter's
over-allotment option. See "Underwriting." As of October 20, 1997, options to
purchase 468,200 shares of Common Stock at an exercise price of $2.50 per share
were outstanding. See "Management -- Employee Stock Option Plan." In addition,
warrants to purchase 323,677 shares of Common Stock at an exercise price of
$4.80 per share had been granted.

13
<PAGE> 15

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth, for the periods and at the dates indicated,
selected historical financial data of the Company. The selected consolidated
historical financial data has been derived from the audited and unaudited
historical consolidated financial statements of the Company and should be read
in conjunction with such financial statements and the notes thereto included
elsewhere in this Prospectus. The unaudited consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the financial position and results of operations for the periods presented.

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JANUARY 28, JANUARY 26, JULY 28, JULY 27,
1996 1996 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SELECTED STATEMENTS OF OPERATIONS
DATA:
REVENUES:
Pawn service charges................. $ 1,337,618 $ 2,291,104 $ 984,927 $ 1,380,096
Merchandise sales.................... 3,051,678 5,522,731 2,449,530 3,104,876
Other income......................... 34,206 89,567 1,071 29,154
----------- ----------- ----------- -----------
Total revenue........................ 4,423,502 7,903,402 3,435,528 4,514,126
Less cost of sales................... (1,941,489) (3,527,670) (1,540,326) (2,088,683)
----------- ----------- ----------- -----------
Gross profit......................... 2,482,013 4,375,732 1,895,202 2,425,443
EXPENSES:
Operating expenses................... 2,625,716 3,863,843 1,629,444 1,786,962
Interest............................. 720,301 1,360,511 598,355 869,787
Depreciation and amortization........ 375,023 495,125 255,883 255,465
Administrative....................... 1,588,600 1,712,568 959,578 1,012,339
----------- ----------- ----------- -----------
Total expenses....................... 5,309,640 7,432,047 3,443,260 3,924,553
----------- ----------- ----------- -----------
Net loss............................. $(2,827,627) $(3,056,315) $(1,548,058) $(1,499,110)
=========== =========== =========== ===========
Pro forma loss per common share(4)... $ (0.42) $ (0.28) $ (0.15) $ (0.10)
=========== =========== =========== ===========
Common and common equivalent shares
outstanding(4)..................... 6,141,658 7,485,484 7,388,360 7,742,980
</TABLE>

<TABLE>
<CAPTION>
AT JULY 27, 1997
-------------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
----------- ------------ --------------
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Loans................................................. $ 2,365,740 $2,365,740 $ 2,365,740
Inventories, net...................................... 2,117,289 2,117,289 2,117,289
Working capital....................................... 3,506,775 3,506,775 11,404,775
Total assets.......................................... 7,262,367 6,683,288 15,333,288
Stockholders' equity (deficit)(1)..................... (4,953,328) 3,987,593 12,637,593
OTHER DATA:
Stores owned.......................................... 19
Average age of stores................................. 2.25 years
</TABLE>

- ---------------

(1) See "Capitalization."

(2) Gives effect to the Preferred Stock Conversion and the Debenture Conversion.

14
<PAGE> 16

15
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Since its inception in January 1994, the Company's store growth has been
funded primarily through debt and equity issuances. Additionally, the Company
has invested in the management and financial controls necessary to support rapid
growth. This growth strategy and the investment in management and financial
controls have substantially increased interest expense and general and
administrative expenses as a percentage of total revenue. Other factors which
have impacted or are expected to impact the Company's results of operations and
cash flows include the maturation of newly established stores and the initial
capital expenditures and costs associated with new stores. Management of the
Company believes that material fluctuations in the results of operations from
lending activities and product sales due to seasonality will not occur.

Maturation of Newly Established Stores

During the fiscal years ended January 29, 1995, January 28, 1996 and
January 26, 1997, the Company opened seven, ten and two stores, respectively.
The Company's newer stores typically experience lower profitability and
operating cash flows than its more mature stores. The Company's newly
established stores experience substantially higher levels of profitability after
reaching two years of age. Historical operating results from the Company's
stores which had been open at least three years as of July 27, 1997 (three
stores) indicate average gross profit during the first three years of operations
of approximately $214,000, $326,000, and $349,000, respectively, and average
store contribution (defined as total store revenues less direct operating
expenses, which exclude general and administrative expenses, interest expense,
and depreciation and amortization expense) during the first three years of
operations of approximately $22,000, $121,000, and $145,000, respectively. As of
July 27, 1997, eight of the Company's 19 stores were under two years of age.
These stores are expected to have a favorable impact on profitability if they
achieve the substantially increased lending and retail volumes experienced by
the Company in its other stores. There can be no assurance that future average
gross profit and store contribution associated with newly established stores
will not vary from historical amounts.

The Company's historical operating results have also indicated improvements
in same store (stores open 12 months or more) total revenues and store
contribution. The Company experienced increases in total revenues and total
store contribution of 23% and 44%, respectively, during the fiscal year ended
January 26, 1997 based on a same store comparison of stores which have been open
for at least two years (seven stores). There can be no assurance that future
same store total revenues and total store contribution will not vary from
historical amounts.

Initial Capital Expenditures and Costs

A key element of the Company's strategy has been to establish (rather than
acquire) PAWNMART(TM) stores meeting the Company's required store size,
configuration, and site selection requirements, in regional and local markets.
Management believes that such anticipated expansion will continue to provide
economies of scale in supervision, purchasing supplies and inventory,
administration and marketing by decreasing the overall average cost of such
functions per unit owned.

After a suitable location has been found and a lease and license are
obtained, the new location can be ready for business within four to six weeks,
with completion of counters, vaults and security system and transfer of
merchandise from existing stores, and external purchases of pre-owned
merchandise. The Company

16
<PAGE> 18

projects the following initial capital expenditures and costs associated with
opening a new PAWNMART(TM) store:

<TABLE>
<S> <C>
Leasehold improvement..................................... $ 35,000
Fixtures & equipment...................................... 45,000
Pre-opening expenses...................................... 7,000
Advertising............................................... 15,000
Initial inventory......................................... 120,000
--------
Total initial opening capital expenditures and
costs......................................... $222,000
========
</TABLE>

In addition, the Company projects incurring aggregate start-up losses of
approximately $13,000 during the first four months of new store operations.
Because of these start-up losses and expenditures necessary to support its
anticipated growth, the Company may incur losses during its high-growth phase.
See "Risk Factors -- Lack of Profitability, Potential Losses." There can be no
assurance that future initial capital expenditures and costs and start-up losses
with new store operations will not vary from historical amounts.

The Company does not capitalize start-up losses and does not recognize pawn
service charges on defaulted loans.

Presented below is selected consolidated historical data for the Company
for the fiscal years ended January 28, 1996 and January 26, 1997, and the six
months ended July 28, 1996 and July 27, 1997. The following table sets forth
certain consolidated financial data expressed as a percentage of total revenue
for the periods indicated and should be read in conjunction with "Risk Factors"
and the consolidated financial statements and notes thereto of the Company
included elsewhere in the Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- --------------------
JANUARY 28, JANUARY 26, JULY 28, JULY 27,
1996 1997 1996 1997
----------- ----------- -------- --------
<S> <C> <C> <C> <C>
Pawn service charges...................... 30.2% 29.0% 28.7% 30.6%
Merchandise sales......................... 69.0 69.9 71.3 68.8
Other income.............................. 0.8 1.1 0.0 0.6
----- ----- ----- -----
Total revenue............................. 100.0 100.0 100.0 100.0
Cost of sales............................. 43.9 44.6 44.8 46.3
----- ----- ----- -----
Gross profit.............................. 56.1 55.4 55.2 53.7
Operating expenses........................ 59.3 48.9 47.5 39.6
----- ----- ----- -----
Store contribution........................ (3.2) 6.5 7.7 14.1
Administrative expenses................... 35.9 21.7 27.9 22.4
Interest.................................. 16.3 17.2 17.4 19.3
Depreciation and amortization............. 8.5 6.3 7.5 5.6
----- ----- ----- -----
Net loss.................................. (63.9)% (38.7)% (45.1)% (33.2)%
===== ===== ===== =====
</TABLE>

RESULTS OF OPERATIONS

SIX MONTHS ENDED JULY 27, 1997 COMPARED TO SIX MONTHS ENDED JULY 28, 1996

Total revenues increased 31% to $4,514,126 for the six months ended July
27, 1997 (the "Six Month 1997 Period") as compared to $3,435,528 for the six
months ended July 28, 1996 (the "Six Month 1996 Period"). $768,875 of this
increase was due to a 23% increase in comparative store revenue for stores
opened 12 months or more ("Comparative Stores") and $309,723 from two stores
opened after Fiscal 1995 (as defined below). Comparative store revenue gains
were primarily attributable to store maturation, increased store traffic and
special promotions. The overall increase is primarily attributable to a 27%
increase in product sales and a 40% increase in pawn service charges.

17
<PAGE> 19

Product sales increased to $3,104,876 for the Six Month 1997 Period from
$2,449,530 for the Six Month 1996 Period. $447,626 of this increase was due to a
19% increase in comparative store sales gains for Comparative Stores and
$207,720 from two stores opened after Fiscal 1995.

Pawn service charges increased to $1,380,096 in the Six Month 1997 Period
from $984,927 in the Six Month 1996 Period primarily due to pawn loans
increasing 18% from $1,997,809 at July 28, 1996 to $2,365,740 at July, 27 1997.
$279,034 of this increase was due to a 29% increase in comparative store pawn
service charge gains for Comparative Stores and $116,135 from two stores opened
after Fiscal 1995. 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.

As a percentage of total revenues, merchandise sales declined from 71% to
69% and pawn service charges increased from 29% to 31%, respectively, during the
Six Month 1997 Period as compared to the Six Month 1996 Period. These changes
reflect the continued growth in pawn loan balances resulting in a corresponding
higher amount of pawn service charges.

Operating expenses increased to $1,786,962 in the Six Month 1997 Period
from $1,629,444 in the Six Month 1996 Period primarily due to the addition of
two new stores after Fiscal 1995. Operating expenses as a percent of total
revenues decreased to 40% in the Six Month 1997 Period from 48% in the Six Month
1996 Period primarily resulting from the large increases in comparable store
sales and pawn service charges discussed above.

Interest expense increased to $869,787 in the Six Month 1997 Period from
$598,355 in the Six Month 1996 Period primarily due to increases in the
outstanding balances of the Company's 14% Convertible Subordinated Debentures
Due June 30, 1999, June 30, 2000 and January 31, 2001.

Administrative expenses increased to $1,012,339 in the Six Month 1997
Period from $959,578 in the Six Month 1996 Period primarily due to increased
salaries associated with the hiring of additional executive management and
increased expenses associated with development of marketing strategies. However,
administrative expenses decreased to 22% of total revenues in the Six Month 1997
Period compared to 28% in the Six Month 1996 Period primarily resulting from the
large increases in comparable store sales and pawn service charges discussed
above.

Store contribution margin increased 140% to $638,481 in the Six Month 1997
Period compared to $265,758 for the Six Month 1996 Period primarily due to
increases in same store product sales and pawn service charges which were not
offset by corresponding increases in operating expenses.

YEAR ENDED JANUARY 26, 1997 COMPARED TO YEAR ENDED JANUARY 28, 1996

Total revenues increased 79% to $7,903,402 during the fiscal year ended
January 26, 1997 ("Fiscal 1996") as compared to $4,423,502 during the fiscal
year ended January 28, 1996 ("Fiscal 1995"). $744,620 of this increase was due
to a 23% increase in comparative store revenue for Comparative Stores and
$2,735,280 from 12 stores opened after the fiscal year ended January 29, 1995
("Fiscal 1994"). Comparative store product revenue gains were primarily
attributable to store maturation, increased store traffic and special
promotions. The overall increase is primarily attributable to a 81% increase in
product sales and a 71% increase in pawn service charges.

Product sales increased to $5,522,731 during Fiscal 1996 from $3,051,678
during Fiscal 1995. $510,841 of this increase was due to a 24% increase in
comparative store sales gains for Comparative Stores and $1,960,212 from 12
stores opened after Fiscal 1994.

Pawn service charges increased to $2,291,104 during Fiscal 1996 from
$1,337,618 during Fiscal 1995 primarily due to pawn loans increasing 54% from
$1,446,503 at January 28, 1996 to $2,227,565 at January 26, 1997. $206,995 of
this increase was due to a 19% increase in comparative store pawn service charge
gains for Comparative Stores and $746,491 from 12 stores opened after Fiscal
1994. The Company expects that, during the first four years of operation, a
store should experience significant increases in loan activity resulting in a

18
<PAGE> 20

higher percentage of loans being renewed causing pawn service charges to
increase as a percentage of loans outstanding.

Operating expenses increased to $3,863,843 during Fiscal 1996 from
$2,625,716 during Fiscal 1995 primarily due to the addition of ten new stores
during Fiscal 1995 and two new stores during Fiscal 1996. Operating expenses as
a percent of total revenues decreased to 49% during Fiscal 1996 from 59% during
Fiscal 1995 primarily resulting from the large increases in comparable store
sales and pawn service charges discussed above.

Interest expense increased to $1,360,511 during Fiscal 1996 from $720,301
during Fiscal 1995 primarily due to increases in the outstanding balances of the
Company's 14% Convertible Subordinated Debentures Due June 30, 1999, June 30,
2000 and January 31, 2001.

Administrative expenses increased to $1,712,568 during Fiscal 1996 from
$1,588,600 during Fiscal 1995 primarily due to increased costs associated with
stock issuances, increased salaries, and other miscellaneous items. However,
administrative expenses decreased to 22% of total revenues during Fiscal 1996
compared to 36% during Fiscal 1995 primarily resulting from the large increases
in comparable store sales and pawn service charges discussed above.

Store contribution margin increased to $511,889 during Fiscal 1996 compared
to a deficit of $143,703 during Fiscal 1995 primarily due to improvement in
store contribution from the maturation of stores opened prior to January 28,
1996 (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview") and only two stores being opened during
Fiscal 1996 lowering the amount of start-up losses.

At January 26, 1997, the Company has accumulated net operating loss carry
forwards for tax purposes of approximately $7,500,000 which are available to
offset future federal taxable income, if any, through 2012.

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 January 26, 1997 and July 27, 1997, the Company operated nineteen
stores. The Company funded these operations from proceeds attributable to debt
and equity issuances. At July 27, 1997, the Company's primary sources of
liquidity were $661,602 in cash and cash equivalents, $244,144 in pawn service
charges receivable, $2,365,740 in loans, and $2,117,289 in inventories. The
Company had a current ratio of approximately 1.9 to 1.0 and 2.8 to 1.0 at
January 26, 1997 and July 27, 1997, respectively. Net cash used in operating
activities was $2,356,914 in Fiscal 1996, $3,354,770 in Fiscal 1995, $2,066,239
in the Six Month 1997 Period and $1,416,800 in the Six Month 1996 Period.

Since its inception in January 1994, the Company has invested in the
management and financial controls expected to be necessary to support rapid
growth. This investment substantially increased general and administrative
expenses as a percentage of total revenue. The Company anticipates incurring
aggregate start-up losses of approximately $13,000 per store during the first
four months of the new store's operation. Because of these start-up losses and
the Company's aggressive expansion plans, the Company may incur losses during
its high-growth phase. See "Risk Factors -- Lack of Profitability, Potential
Losses."

19
<PAGE> 21

The Company's newly established stores generate substantially higher levels
of profitability after reaching two years of age. As of July 27, 1997 eight of
the Company's nineteen stores were under two years of age. Presently, each of
the Company's nineteen stores are experiencing positive store contribution
margins. The Company believes that its store expansion program will be funded by
cash flow from operations from its established stores and the proceeds from the
Offering. In addition to the expansion capital expected to be available from the
proceeds of the Offering, the Company has had discussions with several
commercial banks with regard to a credit facility which would be provided to the
Company upon completion of the Offering. 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.

Management expects that the proceeds generated from the Offering will be
sufficient to support the ongoing expansion activities of the business for
approximately 12 to 18 months, although there can be no assurance that such
proceeds will be adequate to support the Company's aggressive expansion schedule
during such period.

The Company expects to fund ongoing expansion after January 1999 with
proceeds from this Offering, income from current operations, commercial bank
debt and possible future equity offerings.

20
<PAGE> 22

BUSINESS
INDUSTRY

The pawnshop industry is a multi-billion dollar, rapidly growing industry
with an increasing number of states adopting favorable pawnshop regulations. The
industry is highly fragmented, with approximately 95% of the approximately
13,000 stores in the United States owned by "mom and pop" operators and less
than 700 owned by public companies. The Company believes that pawnshops
generally perform well during recessions and all other economic cycles.

Pawnshops provide short-term secured loans. Most pawn loans are for less
than $500. Industry sources believe that banks could not recover the
administrative costs of these small loans without substantial increases in rates
and charges. In addition, many pawn loans are to people who would not qualify as
"credit worthy" at a bank. An estimated 20-40 million people occasionally have
short-term needs, such as for utility bills and medical expenses. For these
people, pawnshops supply cash conveniently and quickly.

Based on its research, the Company has observed somewhat different
demographics for its customers from those generally published for the pawnshop
industry in general. Many of the Company's customers are "credit worthy" and
have bank credit cards. Many are women. The Company's stores also provide a
retail outlet for its value-conscious customers.

THE COMPANY

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 quality merchandise
to the value-conscious consumer. The Company advances 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. To compensate it for the use of the funds
advanced, the Company contracts for a pawn service charge. In the event that the
customer does not redeem the pledged property, it becomes inventory available
for sale by the Company to its retail customers. Currently, the Company owns and
operates 19 stores, of which 11 are located in Georgia, five in Alabama, two in
North Carolina and one in Texas.

The Company was incorporated under the laws of the State of Delaware on
January 13, 1994 and began operations under the name "Pawnco, Inc." On June 14,
1994, the Company changed its name to PCI Capital Corporation and conducted
business under the trade name "PAWNMART(TM)." On October 21, 1997, the Company
changed its name to "PawnMart, Inc." The Company's principal office is located
at 301 Commerce Street, Suite 3600, Fort Worth, Texas 76102 and its telephone
number is (817) 335-7296.

GROWTH STRATEGY

21
<PAGE> 23

- ESTABLISH -- RATHER THAN ACQUIRE -- PAWNMART(TM) 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(TM) 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(TM) has a similar "look and feel."

LENDING OPERATIONS

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 pledged tangible personal
property is intended to provide security to the Company for the repayment of the
amount advanced plus accrued pawn service charges. Pawn loans are made without
personal liability to the borrower. Because the loan is made without the
borrower's personal liability, the Company does not investigate the
creditworthiness of the borrower, but relies on the pledged personal property,
and the possibility of its forfeiture, as a basis for its lending decision.
PAWNLINK(TM) interfaces with the Company's centralized database, and assists in
determining the maximum amount of funds to advance on any particular pawn item.
The Company contracts for a pawn service charge as compensation for the use of
the funds advanced. Pawn service charges contributed 30.2% and 29.0% of the
Company's total revenues during the fiscal years ended January 28,1996 and
January 26, 1997, respectively.

The pledged property is held through the term of the transaction, which
generally is one month with an automatic sixty-day redemption period, except for
automobile title loans, where a shorter redemption period applies under state
regulations. The term of the transaction may continue if the loan is extended
prior to the

22
<PAGE> 24

end of the redemption period. Extensions are for one month with an additional
redemption period. Most of the Company's loans are repaid in full with accrued
service charges or extended through payment of accrued service charges. In the
event the pledgor does not repay or extend the loan by the end of the redemption
period, the unredeemed collateral is forfeited to the Company and becomes
merchandise available for sale.

The recovery of the amount advanced, as well as realization of a profit on
sale of merchandise, is dependent on the Company's initial assessment of the
property's estimated resale value. Improper assessment of the resale value of
the collateral in the lending function can result in reduced marketability of
the property and resale of the merchandise for an amount less than the amount
advanced. However, historically, the Company has experienced profits from the
sale of such merchandise. For example, unexpected technological changes could
adversely impact the value of consumer electronic products and declines in gold
and silver prices could reduce the resale value of jewelry items acquired in
pawn transactions and could adversely affect the Company's ability to recover
the carrying cost of the acquired collateral.

RETAIL SALES OPERATIONS

The Company retails pre-owned products acquired either when a loan is not
repaid or from individual customers or other sources. For the year ended January
26, 1997, $3,847,227 of products were added to inventory, of which $3,155,129
was from loans not repaid and $692,098 was otherwise purchased.

The Company provides its customers with a 30-day guarantee on pre-owned
products, providing the customer with an exchange or cash refund. The Company
believes that most pawnshops do not offer this type of guarantee. The Company
provides a layaway plan whereby the customer agrees to purchase an item by
making an initial cash deposit representing a portion of the sales price and
making additional, non-interest bearing payments of the balance of the sales
price in accordance with a specified schedule. The Company then holds the item
until the sales price is paid in full. Should the customer fail to make a
required payment, the item becomes inventory available for sale.

PROPERTIES

The following table sets forth, as of July 27, 1997, the geographic markets
served by the Company and the number of stores in each market.

<TABLE>
<CAPTION>
NUMBER
OF STORES
---------
<S> <C>
GEORGIA:
Atlanta Metropolitan Area................................ 9
Rome..................................................... 1
Calhoun.................................................. 1
--
Total Georgia.................................... 11
ALABAMA:
Mobile................................................... 4
Dothan................................................... 1
--
Total Alabama.................................... 5
NORTH CAROLINA:
Charlotte................................................ 2
--
Total North Carolina............................. 2
TEXAS:
Weatherford.............................................. 1
--
Total Texas...................................... 1
--
TOTAL............................................ 19
==
</TABLE>

23
<PAGE> 25

The Company considers its equipment, furniture and fixtures and leased
buildings to be in good condition. The Company's leases typically require the
Company to pay all maintenance costs, insurance costs and property taxes.

OPERATIONS

Retail Store Management. Each location has a store manager who typically
supervises its personnel and assures that it is managed in accordance with
Company guidelines and established policies and procedures. Each store manager
reports to a District Manager who will typically supervise up to seven stores.
As of the date of this Prospectus, the Company has established three operating
districts, each of which is managed by a District Manager.

Trade Name. The Company operates its stores under the trade name
"PAWNMART(TM)." The Company has filed applications to register the
"PAWNMART(TM)" marks and descriptive logos and phrases with the United States
Patent and Trademark Office.

Personnel. The Company employed approximately 110 employees as of October
1, 1997. Of the total employees, 12 were in executive, administrative, clerical
and accounting functions. The Company has an established training program that
provides a combination of classroom instruction and on-the-job loan and
specialty retail training.

COMPETITION

The Company encounters significant competition in connection with the
operation of its business. In connection with lending operations, the Company
competes with other pawnshops (owned by individuals and by large operators) and
certain financial institutions, such as consumer finance companies, which
generally lend on an unsecured as well as on a secured basis. The Company's
competitors in connection with its retail sales include numerous retail and
discount stores. Many competitors have greater financial resources than the
Company, including Cash America International, Inc. and EZCORP, Inc. These
competitive conditions may adversely affect the Company's revenues,
profitability and ability to expand.

REGULATION

The Company's store operations are subject to extensive regulation,
supervision and licensing under various federal, state and local statutes,
ordinances and regulations in the four states in which it operates. See
"Business -- Properties." Set forth below is a summary of the state pawnshop
regulations in those states of the Company's present operating locations.

Georgia Pawnshop Regulations. Georgia state law requires pawnbrokers to
maintain detailed permanent records concerning pawn transactions and to keep
them available for inspection by duly authorized law enforcement authorities.
The Georgia statute prohibits pawnbrokers from failing to make entries of
material matters in their permanent records; making false entries in their
records; falsifying, obliterating, destroying, or removing permanent records
from their places of business; refusing to allow duly authorized law enforcement
officers to inspect their records; failing to maintain records of each pawn
transaction for at least four years; accepting a pledge or purchase from a
person under the age of eighteen or who the pawnbroker knows is not the true
owner of the property; making any agreement requiring the personal liability of
the pledgor or seller or waiving any of the provisions of the Georgia statute;
or failing to return or replace pledged goods upon payment of the full amount
due (unless the pledged goods have been taken into custody by a court or a law
enforcement officer). In the event pledged goods are lost or damaged while in
the possession of the pawnbroker, the pawnbroker must replace the lost or
damaged goods with like kinds of merchandise. Under Georgia law, total interest
and service charges may not, during each thirty-day period of the loan, exceed
25% of the principal amount advanced in the pawn transaction (except that after
ninety days from the original date of the loan, the maximum rate declines to
12.5% for each subsequent thirty-day period). The statute provides that
municipal authorities may license pawnbrokers, define their powers and
privileges by ordinance, impose taxes upon them, revoke their licenses, and
exercise such general supervision as will ensure fair dealing between the
pawnbroker and his customers.

24
<PAGE> 26

Alabama Pawnshop Regulations. The Alabama Pawnshop Act regulates the
licensing, operation and reporting requirements of pawnshops in that state. The
general fitness of pawnshop applicants is investigated by the Supervisor of the
Bureau of Loans of the State Department of Banking ("the Supervisor"). The
Supervisor also issues pawnshop licenses. The Alabama Pawnshop Act requires that
certain bookkeeping records be maintained and made available to the Supervisor
and to local law enforcement authorities and that motor vehicles are retained on
the premises for at least 21 days prior to sale by the pawnshop. The Alabama
Pawnshop Act establishes a maximum allowable pawn service charge of 300%
annually.

North Carolina Pawnshop Regulations. In North Carolina, the Pawnbrokers
Modernization Act of 1989 regulates the licensing, reporting and financial
responsibility of pawnbrokers. Appropriate city and county governments must be
petitioned in order to acquire a license. Once licensed, a pawnbroker must keep
consecutively numbered records of each and every pawn transaction. No pawnbroker
may receive an effective rate of interest in excess of 2% per month, except that
the pawnbroker may charge additional fees up to 20% per month for services such
as title investigation, insurance, reporting fees, etc., so long as certain
total dollar limits are not exceeded. Mobile homes, recreational vehicles, or
motor vehicles other than a motorcycle may not be pledged.

Texas Pawnshop Regulations. Pursuant to the terms of the Texas Pawnshop
Act, the Texas Consumer Credit Commissioner has primary responsibility for the
regulation of pawnshops and enforcement of laws relating to pawnshops in Texas.
The Company is required to furnish the Texas Consumer Credit Commissioner with
copies of information, documents and reports which are required to be filed by
it with the Securities and Exchange Commission.

The Texas Pawnshop Act prescribes the stratified loan amounts and the
maximum allowable rates of service charge that pawnbrokers in Texas may charge
for the lending of money within each stratified range of loan amounts ranging
from one percent per month to 20% per month.

As part of the license application process, any existing pawnshop licensee
who would be affected by the granting of the proposed application may request a
public hearing at which to appear and present evidence for or against the
application. For an application for a new license in a county with a population
of 250,000 or more, the Consumer Credit Commissioner must find not only that the
applicant meets the other requirements for a license, but also that (i) there is
a public need for the proposed pawnshop and (ii) the volume of business in the
community in which the pawnshop will conduct business indicates a profitable
operation is probable.

Other Regulatory Matters, Etc. With respect to firearm sales, each of the
stores must comply with the Brady Handgun Violence Prevention Act (the "Brady
Act"), which took effect on February 28, 1994. The Brady Act imposes a waiting
period/background check in connection with the disposition of handguns by
federally licensed firearms dealers. In addition, the Company must continue to
comply with the longstanding regulations promulgated by the Department of the
Treasury, Bureau of Alcohol, Tobacco and Firearms, which require each store
dealing in guns to maintain a permanent written record of all receipts and
dispositions of firearms.

In addition to the state statutes and regulations described above, many of
the Company's stores are subject to municipal ordinances, which may require, for
example, local licenses or permits and specified record-keeping procedures,
among other things. Each of the Company's stores, voluntarily or pursuant to
municipal ordinance, provides to the police department having jurisdiction
copies of all daily transactions involving pawn loans and over-the-counter
purchases. These daily transaction reports are designed to provide the local
police with a detailed description of the goods involved including serial
numbers, if any, and the name and address of the owner obtained from a valid
identification card.

A copy of the transaction ticket is provided to local law enforcement
agencies for processing by the National Crime Investigative Computer to
determine rightful ownership. Goods which are either purchased or held to secure
pawn loans and which are determined to belong to an owner other than the
borrower or seller are subject to recovery by the rightful owner. However, the
Company historically has not experienced a material number of claims of this
sort, and the claims experienced have not had a material adverse effect on the
Company's results of operations.

25
<PAGE> 27

Casualty insurance, including burglary coverage, is maintained for each of
the Company's stores, and fidelity bond coverage is maintained on each of the
Company's employees.

Management of the Company believes its operations are conducted in material
compliance with all federal, state and local laws and ordinances applicable to
its business.

LEGAL PROCEEDINGS

The Company is a defendant in certain lawsuits encountered in the ordinary
course of its business. Certain of these matters are covered to an extent by
insurance. In the opinion of management, the resolution of these matters will
not have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.

26
<PAGE> 28

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information as of the date of this
Prospectus with respect to the directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Carson R. Thompson(1) 58 Chief Executive Officer and Chairman of the Board
Robert D. Bourland, Jr.(2) 56 President, Chief Operating Officer and Director
Thomas W. White 28 Vice President -- Finance and Chief Accounting
Officer
Randall L. Haden 36 Vice President -- Information Services
James E. Berk(2) 52 Director
Robert E. Camp(1) 54 Director
Mark E. Kane(3) 43 Director
Monty R. Standifer(3) 57 Director
</TABLE>

- ---------------

(1) Class I Director whose term expires in 1998.
(2) Class II Director whose term expires in 1999.
(3) Class III Director whose term expires in 2000.

The business experience, principal occupations and employment of each of
the directors and executive officers of the Company during at least the past
five years, together with their periods of service as directors and executive
officers of the Company are set forth below.

Carson R. Thompson joined the Company in August 1996 as a Director. In
March 1997, he was named Chairman of the Board and Chief Executive Officer of
the Company. Prior to this, Mr. Thompson had served as President, Chief
Executive Officer and Chairman of The Bombay Company, Inc., a specialty retailer
of home furnishing products. Mr. Thompson joined Tandy Corporation, Fort Worth,
Texas in 1957, and held various management positions before becoming President
in 1981 of Tandy Brands, Inc., a spin-off of Tandy Corporation and a
manufacturer and specialty retailer of various products. From 1982 to 1991, Mr.
Thompson was Chairman and Chief Executive Officer, from 1991 to 1996, he was
Chairman, and from 1996 to 1997, he was President and Chief Executive Officer of
The Bombay Company. Mr. Thompson serves as a director of the University of North
Texas Health Science Center at Fort Worth, and the Osteopathic Health
Foundation, Inc., and is a member of the Board of Advisors of the College of
Business Administration at the University of Oklahoma.

Robert D. Bourland, Jr. joined the Company in July 1994 as a Director and
President. From 1985 until joining the Company, he served as President of Cook's
Nook, Inc., a specialty retailer of gourmet cookware. From 1964 until that time,
he served in various retail management positions with the Radio Shack division
of Tandy Corporation, including serving as Senior Vice President -- Managing
Director, Tandy U.K. and as Tandy's Divisional Vice President responsible for
1,200 Radio Shack stores. Radio Shack is a specialty retailer of consumer
electronic products.

Thomas W. White joined the Company on October 15, 1997 as Vice
President -- Finance and Chief Accounting Officer. Mr. White was previously
employed for six years with the accounting firm of KPMG Peat Marwick LLP, most
recently as an assurance manager serving numerous clients within the financial
services, manufacturing and retailing industries.

Randall L. Haden joined the Company in February 1994 as Vice
President -- Information Systems. Since November 1991 until joining the Company,
he was employed by Search Capital Group, Inc., a publicly held consumer finance
company, most recently as Vice President -- Information Services.

27
<PAGE> 29

James E. Berk joined the Company in 1997 as a Director. Presently, Mr. Berk
is the Vice Chairman and Chief Executive Officer of APC, Inc., a specialty
retailer and wholesaler of auto parts. Mr. Berk founded and, from 1993 to 1997,
served as the President, Chief Executive Officer and Chairman of the Board for
Teach & Play Smart, Inc., a privately held specialty retail chain of children's
educational products. Prior to that time, he served as President and Chief
Executive Officer of Bizmart, Inc., a chain of office products superstores, and
President and Chief Operating Officer of The Wholesale Club, a chain of discount
retail stores, and served in various other companies in management capacities.

Robert E. Camp joined the Company in July 1995 as a Director. He founded
and, from 1993 until the present, served as President of Hero's Welcome, Inc., a
privately held retail/mail order business. From 1982 until 1992, Mr. Camp was
the founder and Chief Executive Officer of Simpson & Fisher Companies, Inc., a
specialty retailer of apparel and home furnishing products. Mr. Camp is the
former Chief Executive Officer of Fort Worth based Pier 1 Imports, Inc., a
specialty retailer of home furnishing products, having been with that firm for
18 years.

Mark E. Kane joined the Company in September 1997 as Director. Presently,
he is President and Chief Executive Officer of Compact Discs International, LLC,
an international affiliate of CD Warehouse Inc. that owns the worldwide
development rights for the CD Warehouse Inc. franchise concept. Mr. Kane founded
and, from 1992 to 1997, served as President and Chief Executive Officer of CD
Warehouse Inc., a publicly traded national franchising firm specializing in the
sale of new and pre-owned compact discs.

Monty R. Standifer joined the Company in August 1997 as a Director. Mr.
Standifer has served as Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of Gadzooks, Inc., a specialty retailer of apparel
products, since July 1995. From June 1992 until July 1995, Mr. Standifer served
as Vice President -- Treasurer and Chief Financial Officer of Gadzooks, Inc.
From July 1991 to June 1992, Mr. Standifer served as Senior Vice President and
Chief Financial Officer of AmeriServ Food Company, a food service systems
distributor. Prior to that time, Mr. Standifer was a cofounder of Bizmart, Inc.,
a chain of office products superstores, serving as Vice President -- Finance,
Treasurer and Secretary from its founding in October 1987 until July 1991,
shortly after the company was sold. Mr. Standifer was previously employed by
Tandy Corporation for 14 years in various financial management positions.

COMPENSATION OF DIRECTORS

Cash Compensation. No cash compensation has been paid by the Company to its
directors prior to this Offering. Directors are reimbursed for their ordinary
and necessary expenses incurred in attending meetings of the Board of Directors
or a committee thereof.

1997 Stock Option Plan for Directors. Effective as of October 16, 1997, the
1997 PawnMart, Inc. Director Stock Option Plan ("Directors' Option Plan") was
approved by the Company's Board of Directors and the holders of a majority of
the outstanding shares of the Company's Common Stock.

Stock options will be granted under the Directors' Option Plan to any
director who is not an employee of the Company and is not a holder of more than
5% of the outstanding shares of the Company's Common Stock or a person who is in
control of such holder ("Eligible Directors").

A maximum of 400,000 shares of Common Stock (subject to certain
anti-dilution adjustments) may be issued to Eligible Directors upon the exercise
of options granted under the Directors' Option Plan. Currently, no options have
been granted under the Directors' Option Plan.

Newly appointed Eligible Directors will automatically receive an initial
grant of options to purchase 25,000 shares of Common Stock upon their
appointment to the Board of Directors. All Eligible Directors will receive
annual grants of options to purchase the lesser of 20,000 shares of Common Stock
or $200,000 in market value of underlying Common Stock as of the date following
each annual meeting of the Company's stockholders. The exercise price of options
granted under the Directors' Option Plan will be the closing sales price of the
Common Stock on the date of grant. Options granted pursuant to the Directors'
Option Plan are immediately exercisable. The expiration date is six years from
the date of grant. Payment for shares purchased

28
<PAGE> 30

upon exercising an option is made in cash or by certified check, bank draft or
money order, or by delivery of previously owned shares of Common Stock held for
at least six months (at their fair market value), or partly in cash and partly
in such Common Stock.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company to its
President and Chief Executive Officer during the fiscal years ended January 29,
1995, January 28, 1996 and January 26,1997, for services rendered to the Company
in all capacities during those fiscal years. No other executive officer of the
Company had total salary and bonus which exceeded $100,000 for any of those
fiscal years.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------------------------------
FISCAL OTHER ANNUAL
YEAR SALARY BONUS COMPENSATION(1)
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Robert D. Bourland, Jr.
President and Chief Executive Officer.......... 1996 $90,000 $15,000 --
1995 $90,000 -- --
1994 $90,000 -- --
</TABLE>

- ---------------------

(1) Mr. Bourland received personal benefits in addition to salary and bonuses.
The aggregate amount of such personal benefits, however, did not exceed the
lesser of $50,000 or 10% of the total of his annual salary and bonus.

EMPLOYEE STOCK OPTION PLAN

The Board of Directors and the stockholders of the Company have approved
the adoption of the 1997 PawnMart, Inc. Employee Stock Option Plan (the "Plan").
Stock options granted pursuant to the Plan may be either incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), or non-qualified stock options. The
number of shares of Common Stock reserved for issuance pursuant to the Plan is
750,000 shares. As of the date of this prospectus, options for 468,200 shares of
Common Stock had been granted and are outstanding under the Plan. All options
have an exercise price of $2.50 per share of Common Stock.

The Plan is administered by the Compensation and Human Resources Committee
(the "Committee") of the Board of Directors. Subject to the provisions of the
Plan, the Committee has the exclusive power to grant options, to interpret the
Plan, to grant waivers of restrictions thereunder and to adopt such rules and
regulations as it may deem necessary or appropriate in keeping with the
objectives of the Plan.

Options granted pursuant to the Plan become exercisable on such date or
dates as may be established by the Committee. The exercise price of options
granted under the Plan may not be an amount less than the market value of Common
Stock at the time of grant. The exercise price must be paid in full in cash at
the time an option is exercised or, if permitted by the Committee, by means of
tendering previously owned shares of Common Stock held for at least six months
(at their fair market value), or partly in cash and partly in Common Stock.

In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, the Committee is
authorized to make appropriate adjustments to the exercise price and number of
shares subject to options granted under the Plan. Subject to certain
limitations, the Board of Directors is authorized to amend, modify or terminate
the Plan to meet any changes in legal requirements or for any other purpose
permitted by law.

29
<PAGE> 31

CERTAIN TRANSACTIONS

In July of 1997, Mr. Thompson acquired an aggregate of 375,000 shares of
12% Series D Convertible Exchangeable Preferred Stock ("Series D") for $750,000
in connection with Mr. Thompson's becoming Chief Executive Officer of the
Company. In connection with the Offering, the 375,000 Series D will
automatically be converted into 187,500 shares of Common Stock at a conversion
price of $4.00 per share. In March of 1996, Mr. Thompson purchased a principal
amount of $228,000 of 14% unsecured Convertible Subordinated Debentures due June
30, 1999. In October 1997, Mr. Standifer acquired an aggregate of 50,000 shares
of Series D for $100,000 in connection with Mr. Standifer's becoming a Director
of the Company. In connection with the Offering, the 50,000 Series D will
automatically be converted into 25,000 shares of Common Stock at a conversion
price of $4.00 per share.

In consideration for serving as a Director of the Company, in September
1997, Mr. Berk received 12,500 shares of Common Stock; in April 1996 and August
1997, Mr. Camp received an aggregate amount of 25,000 shares of Common Stock; in
September 1997, Mr. Kane received 12,500 shares of Common Stock; in September
1997, Mr. Standifer received 12,500 shares of Common Stock and in April 1996 and
August 1997, Mr. Thompson received 12,500 and 7,500 shares of Common Stock,
respectively. In connection with his employment with the Company, in August
1997, Mr. Bourland received 25,000 shares of Common Stock. In connection with
joining the Company, in October 1997, Mr. White received 12,500 shares of Common
Stock.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of October 20, 1997,
and as adjusted to reflect the sale of 2,000,000 shares of Common Stock by the
Company in this Offering, regarding the beneficial ownership of the Company's
Common Stock by: (i) all persons known by the Company to own beneficially more
than 5% of the Company's Common Stock; (ii) each director of the Company; (iii)
the Chief Executive Officer of the Company; and (iv) all directors and executive
officers of the Company individually and as a group.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(1)
--------------------
NAME AND ADDRESS NUMBER BEFORE AFTER
OF BENEFICIAL OWNERS OF SHARES OFFERING OFFERING
-------------------- --------- -------- --------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Carson R. Thompson(2)....................................... 369,500 5.2% 4.1%
Robert D. Bourland, Jr.(2).................................. 111,607 1.6% 1.2%
Thomas W. White(2).......................................... 12,500 * *
Randall L. Haden(2)......................................... 53,605 * *
Robert E. Camp(3)........................................... 25,000 * *
James E. Berk(4)............................................ 12,500 * *
Monty R. Standifer(5)....................................... 12,500 * *
Mark E. Kane(6)............................................. 12,500 * *
All directors and executive officers as a group (8
persons).................................................. 609,712 8.6% 6.7%
OTHER SIGNIFICANT HOLDERS:
Joe Owens(7)................................................ 468,700 6.6% 5.2%
</TABLE>

- ---------------

* Less than 1%.

(1) Unless otherwise noted, the Company believes that each person named in the
table has sole voting and investment power with respect to all shares
beneficially owned by such persons.

(2) His address is 301 Commerce Street, Suite 3600, Fort Worth, Texas 76102.

(3) The address for Mr. Camp is Rural Route 2, North Hero, Vermont 05474.

(4) The address for Mr. Berk is 5825 Obelin, Suite 100, San Diego, California
92121.

30
<PAGE> 32

(5) The address for Mr. Standifer is 4121 International Parkway, Carrollton,
Texas 75007.

(6) The address for Mr. Kane is 1017 N. Central Expressway, Suite 200, Plano,
Texas 75075.

(7) Mr. Owens is one of the founders of the Company, and his address is 5201
Odessa Dr., Fort Worth, Texas 76133.

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock and selected
provisions of its Restated Certificate of Incorporation and By-laws, is a
summary and is qualified in its entirety by the Company's Restated Certificate
of Incorporation and By-laws, as amended, copies of which have been filed with
the Securities and Exchange Commission as exhibits to the Registration Statement
of which this Prospectus is a part.

GENERAL

At the time of the Offering, the total amount of authorized capital stock
of the Company will consist of 20,000,000 shares of Common Stock, par value $.01
per share and 10,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). Upon completion of the Offering, 9,120,498 shares of
Common Stock and no shares of Preferred Stock will be issued and outstanding
(assuming an initial public offering price of $5 per share). After giving effect
to the Preferred Stock and Debenture Conversions, there will be approximately
850 holders of record of the Company's Common Stock. The following summary of
certain provisions of the Company's capital stock describes all material
provisions of, but does not purport to be complete and is subject to, and
qualified in its entirety by, the Restated Certificate of Incorporation and the
By-laws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.

The Restated Certificate of Incorporation and By-laws will contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and which may have the
effect of delaying, deferring or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved by
the Board of Directors.

COMMON STOCK

The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered by the Company will be upon payment therefor, validly
issued, fully paid and nonassessable. Subject to the prior rights of the holders
of any Preferred Stock, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine. See "Dividend Policy." The shares of Common Stock are not convertible
and the holders thereof have no preemptive or subscription rights to purchase
any securities of the Company. Upon liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive pro rata the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of Preferred Stock then outstanding. Each outstanding share of
Common Stock is entitled to one vote on all matters submitted to a vote of
stockholders. There is no cumulative voting. Accordingly, holders of a majority
of the shares of Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. Except as otherwise required
by law or the Restated Certificate of Incorporation, the Common Stock will vote
on all matters submitted to a vote of the stockholders, including the election
of directors.

PREFERRED STOCK

The Board of Directors may, without further action by the Company's
stockholders, from time to time, direct the issuance of shares of Preferred
Stock in series and may, at the time of issuance, determine the rights,
preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding shares of Preferred Stock would reduce the amount of
funds available for the payment of dividends on shares

31
<PAGE> 33

of Common Stock. Holders of shares of Preferred Stock may be entitled to receive
a preference payment in the event of any liquidation, dissolution or winding-up
of the Company before any payment is made to the holders of shares of Common
Stock. Under certain circumstances, the issuance of shares of Preferred Stock
may render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. Upon the affirmative vote of
a majority of the total number of directors then in office, the Board of
Directors, without stockholder approval, may issue shares of Preferred Stock
with voting and conversion rights which could adversely affect the holders of
shares of Common Stock. Upon consummation of the Offering, there will be no
shares of Preferred Stock outstanding, and the Company has no present intention
to issue any shares of Preferred Stock.

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS

The Restated Certificate of Incorporation provides for the Board to be
divided into three classes, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of the Board will be elected each year.
See "Management." Under the Delaware General Corporation Law, directors serving
on a classified board can only be removed for cause. The provision for a
classified board could prevent a party who acquires control of a majority of the
outstanding voting stock from obtaining control of the Board until the second
annual stockholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could have the effect
of discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company and could increase the likelihood
that incumbent directors will retain their positions.

The Restated Certificate of Incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and cannot be
taken by written consent in lieu of a meeting. The Restated Certificate of
Incorporation and the By-laws provide that, except as otherwise required by law,
special meetings of the stockholders can only be called pursuant to a resolution
adopted by a majority of the Board of Directors or by the Chief Executive
Officer of the Company. Stockholders will not be permitted to call a special
meeting or to require the Board to call a special meeting.

The By-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company, including
proposed nominations of persons for election to the Board.

Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before the meeting by
or at the direction of the Board or by a stockholder who was a stockholder of
record on the record date for the meeting, who is entitled to vote at the
meeting and who has given to the Company's Secretary timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. Although the By-laws do not give the Board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or deter a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company.

The Restated Certificate of Incorporation and By-laws provide that the
affirmative vote of holders of at least 66 2/3% of the total votes eligible to
be cast in the election of directors is required to amend, alter, change or
repeal certain of their provisions. This requirement of a super-majority vote to
approve amendments to the Restated Certificate of Incorporation and By-laws
could enable a minority of the Company's stockholders to exercise veto power
over any such amendments.

CERTAIN PROVISIONS OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "Business Combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested

32
<PAGE> 34

stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless: (i) the transaction
is approved by the Board of Directors prior to the date the "interested
stockholder" obtained such status; (ii) upon consummation of the transaction
which resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder," owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned by
(a) persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) on or subsequent to such date the "business combination" is
approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" is defined to include mergers, asset sales and other
transactions resulting in financial benefit to a stockholder. In general, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Restated Certificate of Incorporation limits the liability of directors
to the fullest extent permitted by the Delaware General Corporation Law. In
addition, the Restated Certificate of Incorporation will provide that the
Company shall indemnify directors and officers of the Company to the fullest
extent permitted by such law. The Company anticipates entering into separate
indemnification agreements with its current directors and executive officers
prior to the completion of the Offering which will have the effect of providing
such persons indemnification protection in the event the Restated Certificate of
Incorporation is subsequently amended.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank, N.A., Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 9,120,498 shares of
Common Stock outstanding. All of the 2,000,000 shares sold by the Company in
this Offering will be freely transferable without further restriction or
registration under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (as defined under the Securities Act). At the date of
this Prospectus there were outstanding 7,120,498 shares of Common Stock on a pro
forma basis, all of which shares are "restricted securities" under applicable
securities laws. All of these shares either will be subject to the resale
restrictions described below or will not be held for one year until December
1998. Additional shares of Common Stock may become eligible for sale in the
public market from time to time upon exercise of warrants and stock options.

Holders of restricted securities must comply with the requirements of Rule
144 in order to sell their shares in the open market. In general, under Rule 144
as currently in effect, any affiliate of the Company and any person (or persons
whose sales are aggregated) who has beneficially owned his or her restricted
shares for at least one year would be entitled to sell in the open market within
any three-month period a number of shares that does not exceed the greater of:
(i) 1% of the then outstanding shares of the Company's Common Stock (91,205
shares immediately after this offering) or (ii) the average weekly trading
volume reported on the American Stock Exchange during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
limitations on manner of sale, notice requirements, and availability of current
public information about the Company. Nonaffiliates who have held their
restricted shares for two years are entitled to sell their shares under Rule 144
without regard to any of the above limitations, provided they have not been

33
<PAGE> 35

affiliates of the Company for the three months preceding such sale. An aggregate
of 750,000 shares of Common Stock has been reserved for issuance to employees of
the Company pursuant to the Plan. In addition, an aggregate of 400,000 shares of
Common Stock have been reserved for issuance to directors of the Company
pursuant to the Directors' Option Plan.

Subject to certain exceptions, each of the officers and directors of the
Company and each other holder of Common Stock prior to the Offering have agreed
with the Underwriters not to offer, sell, contract to sell or otherwise dispose
of any shares of Common Stock until December 1998 without the prior written
consent of the Underwriter.

The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of Common Stock. Nevertheless, sales of significant amounts of
Common Stock could adversely affect the prevailing market price of Common Stock,
as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities.

UNDERWRITING

The underwriter named below (the "Underwriter") has agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
the number of shares of Common Stock as set forth below. The nature of the
obligations of the Underwriter is such that if any of such shares are purchased,
all must be purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
ComVest Partners, Inc.......................................
---------
Total............................................. 2,000,000
=========
</TABLE>

The Underwriter has advised the Company that it proposes initially to offer
the shares of Common Stock offered hereby to the public at the price set forth
on the cover page of this Prospectus. The Underwriter may allow a concession to
selected dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") not in excess of $ per share, and the
Underwriter may allow, and such dealers may reallow, to members of the NASD a
concession not in excess of $ per share. After the public offering, the
price to public, the concession and the reallowance may be changed by the
Underwriter.

ComVest Partners, Inc. ("ComVest"), the Underwriter, has participated in a
limited number of public equity offerings as an underwriter. Prospective
purchasers of the securities offered hereby should consider ComVest's limited
underwriting experience in evaluating this Offering.

The Company has granted an option to the Underwriter, exercisable within 45
business days after the date of this Prospectus, to purchase up to an aggregate
of 300,000 additional shares of Common Stock, at the initial price to public,
less the underwriting discount, set forth on the cover page of this Prospectus.
The Underwriter may exercise the option only for the purpose of covering
over-allotments. To the extent that the Underwriter exercises such option, the
Underwriter will be committed, subject to certain conditions, to purchase from
the Company on a pro rata basis that number of additional shares of Common Stock
which is proportionate to such Underwriter's initial commitment.

The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.

The Company has agreed to pay to the Underwriter a nonaccountable expense
allowance of 1.5% of the gross proceeds derived from the sale of the shares of
Common Stock underwritten (including the sale of any shares of Common Stock
subject to the Underwriter's over-allotment option). The Company also has agreed
to pay all expenses in connection with qualifying the Common Stock offered
hereby for sale under the laws of such states as the Underwriter may designate,
including filing fees and fees and expenses of counsel retained for such
purposes by the Underwriter and registering the Offering with the NASD.

34
<PAGE> 36

In connection with this Offering, the Company has agreed to sell to the
Underwriter, for a price of $.001 per warrant, warrants (the "Underwriter's
Warrants") to purchase shares of Common Stock equal to 10% of the total number
of shares sold pursuant to this Offering, excluding shares subject to the
over-allotment option. The Underwriter's Warrants are exercisable at a price
equal to 120% of the initial public offering price ($6.00 assuming an initial
public offering price of $5.00 per share) for a period of four years commencing
one year from the date of this Prospectus (the "Exercise Period"). The
Underwriter's Warrants grant to the holder thereof, with respect to the
registration under the Securities Act of the securities directly and indirectly
issuable upon exercise of the Underwriter's Warrants, one demand registration
right during the Exercise Period, as well as piggyback registration rights at
any time. The Company and its executive officers and directors have agreed that
for a period of 12 months after the date of this Prospectus, they will not
offer, sell or otherwise dispose of any shares of Common Stock beneficially
owned or controlled by them (including subsequently acquired shares) without the
prior written consent of ComVest which consent shall not be unreasonably
withheld.

At the Company's request, the Underwriter have reserved up to shares
of Common Stock (the "Directed Shares") for sale at the public offering price to
approximately 20 persons who are directors, officers or employees of, or
otherwise associated with, the Company and who have advised the Company of their
desire to participate in its future growth. Each director and executive officer
who is a purchaser of Directed Shares will be required to agree to restrictions
on resale similar to those described in the immediately preceding paragraph.
However, the Underwriter is not obligated to sell any shares to any such
persons. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent of sales of Directed Shares to any of the
persons for whom they have been reserved. Any shares not so purchased will be
offered by the Underwriter on the same basis as all other shares offered hereby.

Prior to this Offering, there has been no market for the Common Stock and
there can be no assurance that a regular trading market will develop upon the
completion of this Offering. The initial public offering price was determined by
negotiations between the Company and the Underwriter. The primary factors
considered in determining such offering price included the history of and
prospects for the Company's business and the industry in which the Company
competes, market valuation of comparable companies, market conditions for public
offerings, the prospects for future earnings of the Company, an assessment of
the Company's management, the general condition of the securities markets, the
demand for similar securities of comparable companies and other relevant
factors.

In order to facilitate the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Common Stock during and after the Offering. Specifically, the
Underwriter may over-allot or otherwise create a short position in the Common
Stock for their own account by selling more shares of Common Stock than have
been sold to them by the Company. The Underwriter may elect to cover any such
short position by purchasing shares of Common Stock in the open market or by
exercising the over-allotment option granted to the Underwriter. In addition,
such persons may stabilize or maintain the price of the Common Stock by bidding
for or purchasing shares of Common Stock in the open market and may impose
penalty bids, under which selling concessions allowed to syndicate members or
other broker-dealers participating in the Offering are reclaimed if shares of
Common Stock previously distributed in the Offering are repurchased in
connection with stabilizing transactions or otherwise. The effect of these
transactions may be to stabilize or maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the Common Stock to
the extent that it discourages resales thereof. No representation is made as to
the magnitude or effect of any such stabilization or other transactions. Such
transactions, if commenced, may be discontinued at any time.

The Underwriter has advised the Company that the Underwriter does not
expect any sales by the Underwriter to accounts over which they exercise
discretionary authority.

In connection with the offering made hereby, the Underwriter and selling
group members (if any) or their respective affiliates may engage in passive
market making transactions with the Common Stock in accordance with Regulation M
under the Exchange Act, during a specified period before commencement of

35
<PAGE> 37

offers or sales of the Common Stock. The passive market making transactions must
comply with applicable volume and price limits and be identified as such. In
general, a passive market maker may display its bid at a price not in excess of
the highest independent bid for such security; if all independent bids are
lowered below the passive market maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jordaan, Howard & Pennington, P.L.L.C., Dallas, Texas.
Certain legal matters in connection with the sale of the Common Stock offered
hereby will be passed on for the Underwriter by Gardere & Wynne, L.L.P., Dallas,
Texas. Members of Jordaan, Howard & Pennington, P.L.L.C. own beneficially an
aggregate of 137,500 shares of Common Stock.

EXPERTS

The consolidated financial statements of PawnMart, Inc. as of January 26,
1997 and January 28, 1996, and for the years then ended have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The report of KPMG Peat
Marwick LLP contains an explanatory paragraph that states that the Company has
suffered recurring losses from operations, has experienced negative cash flows
from operating activities and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

36
<PAGE> 38

PAWNMART, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of January 26, 1997 and
January 28, 1996.......................................... F-3
Consolidated Statements of Operations for the Years Ended
January 26, 1997 and January 28, 1996..................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended January 26, 1997 and January 28,
1996...................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
January 26, 1997 and January 28, 1996..................... F-6
Notes to Consolidated Financial Statements.................. F-7
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of July 27, 1997 (unaudited)
and January 26, 1997...................................... F-18
Consolidated Statements of Operations for the Six Months
Ended July 27, 1997 (unaudited) and July 28, 1996
(unaudited)............................................... F-19
Consolidated Statements of Cash Flows for the Six Months
Ended July 27, 1997 (unaudited) and July 28, 1996
(unaudited)............................................... F-20
Notes to Unaudited Consolidated Financial Statements........ F-21
</TABLE>

F-1
<PAGE> 39

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
PawnMart, Inc.:

We have audited the accompanying consolidated balance sheets of PawnMart,
Inc. and subsidiaries, (formerly PCI Capital Corporation and subsidiaries) as of
January 26, 1997 and January 28, 1996, and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PawnMart,
Inc. and subsidiaries as of January 26, 1997 and January 28, 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in note
2(j) to the consolidated financial statements, the Company has suffered
recurring losses from operations, has experienced negative cash flows from
operating activities, and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 2(j). The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

KPMG Peat Marwick LLP

Fort Worth, Texas
June 27, 1997, except for the
last four paragraphs of note 11
which are as of August 21, 1997

F-2
<PAGE> 40

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JANUARY 26, 1997 AND JANUARY 28, 1996

ASSETS

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 142,993 $ 126,918
Accounts receivable....................................... 22,735 10,239
Pawn service charges receivable........................... 229,918 207,746
Loans (note 5)............................................ 2,227,565 1,446,503
Inventories, net (note 5)................................. 1,970,741 1,489,529
Prepaid expenses and other current assets................. 18,117 47,230
----------- -----------
Total current assets.............................. 4,612,069 3,328,165
----------- -----------
Property and equipment, net (notes 3 and 5)................. 1,049,281 1,205,245
Goodwill and other intangible assets, net (note 4).......... 122,787 182,781
Debt issuance costs, net of accumulated amortization of
$329,838 and $101,480 at January 26, 1997 and January 28,
1996, respectively
(note 5).................................................. 555,262 408,535
Other assets................................................ 134,296 123,864
----------- -----------
$ 6,473,695 $ 5,248,590
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable, including $80,000 to a company owned by
a stockholder at January 26, 1997...................... $ 331,489 $ 299,727
Bank overdraft............................................ 109,915 28,347
Accrued expenses.......................................... 966,240 556,157
Current installments of notes payable, including $50,000
and $103,100 payable to stockholders at January 26,
1997 and January 28, 1996, respectively (note 5)....... 1,056,667 193,100
----------- -----------
Total current liabilities......................... 2,464,311 1,077,331
----------- -----------
Long-term notes payable, net of current installments (note
5)........................................................ 8,287,333 5,445,150
----------- -----------
Total liabilities................................. 10,751,644 6,522,481
----------- -----------
Stockholders' equity (deficit) (notes 5, 7, 8, 10, 11, and
12):
Preferred stock, $.01 par value; authorized 10,000,000
shares:
$.50 Series A Convertible Preferred stock; 2,000,000
shares issued and outstanding (liquidation preference
of $.50 per share).................................... 20,000 20,000
Series B Convertible Preferred stock; 1,089,020 and
1,074,626 shares issued at January 26, 1997 and
January 28, 1996, respectively (liquidation preference
of $2.00 per share)................................... 10,890 10,746
Common stock, $.01 par value; authorized 20,000,000
shares; 2,797,703 and 2,667,405 shares issued and
outstanding at January 26, 1997 and January 28, 1996,
respectively........................................... 27,977 26,674
Additional paid-in capital................................ 3,266,280 3,200,470
Accumulated deficit....................................... (7,538,096) (4,481,781)
----------- -----------
(4,212,949) (1,223,891)
----------- -----------
Less treasury stock, at cost; 15,000 common shares and
25,000 Series B Convertible Preferred shares at January
26, 1997 and 25,000 Series B Convertible Preferred
shares at January 28, 1996 (note 7).................... (65,000) (50,000)
----------- -----------
Total stockholders' deficit....................... (4,277,949) (1,273,891)
Commitments, contingencies and subsequent events (notes 9,
11 and 12)
----------- -----------
$ 6,473,695 $ 5,248,590
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 41

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 26, 1997 AND JANUARY 28, 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Merchandise sales......................................... $ 5,522,731 $ 3,051,678
Pawn service charges...................................... 2,291,104 1,337,618
Other..................................................... 89,567 34,206
----------- -----------
Total revenues.................................... 7,903,402 4,423,502
Cost of sales............................................... 3,527,670 1,941,489
----------- -----------
4,375,732 2,482,013
----------- -----------
Expenses:
Operating................................................. 3,863,843 2,625,716
Interest, including $12,117 and $24,671 to stockholders
during 1997 and 1996, respectively (note 5)............ 1,360,511 720,301
Depreciation.............................................. 435,131 315,028
Amortization.............................................. 59,994 59,995
Administrative (note 7)................................... 1,712,568 1,588,600
----------- -----------
Total expenses.................................... 7,432,047 5,309,640
----------- -----------
Net loss.......................................... $(3,056,315) $(2,827,627)
=========== ===========
Pro forma loss per common share (note 2(n))....... $ (0.28) $ (0.42)
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 42

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JANUARY 26, 1997 AND JANUARY 28, 1996
<TABLE>
<CAPTION>
$.50 SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
COMMON STOCK PREFERRED STOCK PREFERRED STOCK ADDITIONAL
------------------- ------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- ------- --------- ------- --------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 29,
1995...................... 2,433,421 $24,334 2,000,000 $20,000 448,139 $ 4,481 2,027,786 (1,654,154)
Issuance of common stock
(note 7).................. 233,984 2,340 -- -- -- -- 2,340 --
Issuance of preferred stock,
net of $96,365 issue costs
(notes 7 and 10).......... -- -- -- -- 626,487 6,265 1,150,344 --
Acquisition of 25,000 shares
of Series B Convertible
Preferred stock (note
7)........................ -- -- -- -- -- -- -- --
Capital contribution for
services (note 7)......... -- -- -- -- -- 20,000 --
Net loss.................... -- -- -- -- -- -- -- (2,827,627)
--------- ------- --------- ------- --------- ------- --------- ----------
Balance at January 28,
1996...................... 2,667,405 26,674 2,000,000 20,000 1,074,626 10,746 3,200,470 (4,481,781)
Issuance of common stock
(note 7).................. 130,298 1,303 -- -- -- -- 29,969 --
Issuance of preferred stock
(notes 7 and 10).......... -- -- -- -- 14,394 144 35,841 --
Acquisition of 15,000 shares
of common stock (note
7)........................ -- -- -- -- -- -- -- --
Net loss.................... -- -- -- -- -- -- -- (3,056,315)
--------- ------- --------- ------- --------- ------- --------- ----------
Balance at January 26,
1997...................... 2,797,703 $27,977 2,000,000 $20,000 1,089,020 $10,890 3,266,280 (7,538,096)
========= ======= ========= ======= ========= ======= ========= ==========

TOTAL
STOCKHOLDERS'
TREASURY EQUITY
STOCK (DEFICIT)
-------- -------------
<S> <C> <C>
Balance at January 29,
1995...................... -- 422,447
Issuance of common stock
(note 7).................. -- 4,680
Issuance of preferred stock,
net of $96,365 issue costs
(notes 7 and 10).......... -- 1,156,609
Acquisition of 25,000 shares
of Series B Convertible
Preferred stock (note
7)........................ (50,000) (50,000)
Capital contribution for
services (note 7)......... -- 20,000
Net loss.................... -- (2,827,627)
------- ----------
Balance at January 28,
1996...................... (50,000) (1,273,891)
Issuance of common stock
(note 7).................. -- 31,272
Issuance of preferred stock
(notes 7 and 10).......... -- 35,985
Acquisition of 15,000 shares
of common stock (note
7)........................ (15,000) (15,000)
Net loss.................... -- (3,056,315)
------- ----------
Balance at January 26,
1997...................... (65,000) (4,277,949)
======= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 43

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 26, 1997 AND JANUARY 28, 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(3,056,315) $(2,827,627)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 495,125 375,023
Amortization of debt issuance costs.................... 228,358 92,696
Capital contribution for services...................... -- 20,000
Common stock issued for services....................... 31,272 4,180
Changes in operating assets and liabilities:
Accounts receivable.................................. (12,496) 18,440
Pawn service charges receivable...................... (22,172) (131,793)
Inventories.......................................... (481,212) (929,663)
Prepaid expenses and other current assets............ 29,113 (21,128)
Other assets......................................... (10,432) (63,520)
Accounts payable..................................... 31,762 (124,474)
Accrued expenses..................................... 410,083 233,096
----------- -----------
Net cash used in operating activities............. (2,356,914) (3,354,770)
----------- -----------
Cash flows from investing activities:
Net increase in pawn loans................................ (781,062) (875,426)
Purchases of property and equipment....................... (279,167) (821,984)
----------- -----------
Net cash used in investing activities............. (1,060,229) (1,697,410)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable, including $53,779
and $29,400 in borrowings from stockholders during 1997
and 1996, respectively................................. 4,269,168 4,558,550
Principal payments on notes payable, including $106,879
and $150,153 in payments to stockholders during 1997
and 1996, respectively................................. (563,418) (226,581)
Proceeds from issuance of common stock.................... -- 500
Purchases of treasury stock............................... (15,000) --
Payment of debt issuance costs............................ (375,085) (438,915)
Net proceeds from issuance of preferred stock............. 35,985 1,156,609
Increase in bank overdraft................................ 81,568 9,410
----------- -----------
Net cash provided by financing activities......... 3,433,218 5,059,573
----------- -----------
Net increase in cash and cash equivalents................... 16,075 7,393
Cash and cash equivalents at beginning of year.............. 126,918 119,525
----------- -----------
Cash and cash equivalents at end of year.................... $ 142,993 $ 126,918
=========== ===========
Supplemental disclosures of cash flow information --
Cash paid for interest.................................... $ 1,341,293 $ 652,669
=========== ===========
Noncash activities -- Acquisition of 25,000 shares of Series
B Convertible Preferred stock in exchange for 14%
unsecured Convertible Subordinated Debentures (note 7).... $ -- $ 50,000
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 44

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 26, 1997 AND JANUARY 28, 1996

(1) ORGANIZATION AND BUSINESS

PawnMart, Inc. (the Company), formerly PCI Capital Corporation (note 12),
was incorporated in Delaware on January 13, 1994. The Company is engaged in
establishing, acquiring and operating pawnshops that lend money on the security
of pledged tangible personal property. In addition to making short-term loans,
the Company offers for resale the personal property forfeited by individuals on
loans, as well as personal property purchased directly from customers. As of
January 26, 1997, the Company owned and operated 19 stores located in Texas,
Georgia, North Carolina, and Alabama.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation and Fiscal Years

The consolidated financial statements include the financial statements of
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. (Note 5). All significant intercompany balances and
transactions have been eliminated in consolidation.

Effective April 16, 1996, the Company retroactively changed its year end to
a fiscal year which ends on the last Sunday of January. Accordingly, the fiscal
years ended January 26, 1997 and January 28, 1996 consist of 52 weeks. Certain
future fiscal years will consist of 53 weeks.

(b) Cash and Cash Equivalents

The Company considers any highly liquid investments with original
maturities of three months or less to be cash equivalents.

Pawn loans (loans) are generally made on the pledge of tangible personal
property for a one month period, with an automatic sixty day extension period.
Pawn service charges on loans are recognized on an accrual basis during the
initial thirty day loan period and applicable sixty day extension period, net of
an allowance for pawn service charges deemed uncollectible, based on the
Company's historical loan redemption rate. If a loan is not repaid, the
principal amount advanced on the loan, exclusive of any uncollected pawn service
charges, becomes the carrying value of the forfeited collateral (inventory),
which is recovered through sale.

(d) Inventories

Inventories are recorded at cost and represent merchandise acquired from
forfeited loans, merchandise purchased directly from the public and merchandise
purchased from vendors. Inventories from forfeited loans are recorded at the
principal amount advanced on the related collateral, exclusive of any
uncollected pawn service charges. The cost of inventories is determined on the
specific identification method. Inventories are stated at the lower of cost or
market. Interim payments from customers on layaway sales are credited to
deferred revenue and subsequently recorded as income during the period in which
final payment is received.

The Company provides an allowance for shrinkage and valuation based on
management's evaluation of the merchandise. The allowance deducted from the
carrying value of inventory totaled $83,767 and $51,830 at January 26, 1997 and
January 28, 1996, respectively.

F-7
<PAGE> 45

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(e) Property and Equipment

Property and equipment are recorded at cost. Depreciation is determined on
the straight-line method based on estimated useful lives of three to five years
for equipment. The costs of improvements on leased stores are capitalized as
leasehold improvements and are amortized on the straight-line method over the
shorter of the lease term or their estimated useful lives.

The cost of property retired or sold and the related accumulated
depreciation is removed from the accounts and any resulting gain or loss is
recorded in the results of operations in the period retired.

(f) Goodwill

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally five years. The Company assesses the
recoverability of goodwill by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through undiscounted
future operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.

(g) Intangible Assets

Intangible assets consisting of an amount applicable to a noncompete
agreement with a founding stockholder and the cost of acquiring a trade name are
being amortized over an estimated useful life of five years.

(h) Income Taxes

The Company and its subsidiaries intend to file a consolidated Federal
income tax return. Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the fiscal years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(i) Advertising Costs

Advertising costs are expensed the first time advertising takes place.
Advertising expense was approximately $104,000 and $161,000 for the fiscal years
ended January 26, 1997 and January 28, 1996, respectively.

(j) Net Losses and Management's Plans

The accompanying consolidated financial statements have been prepared on a
going concern basis. At January 26, 1997, the Company's total stockholders'
deficit totaled $4,277,949. Additionally, the Company has incurred net losses of
$3,056,315 and $2,827,627 and used net cash from its operating activities of
$2,356,914 and $3,354,770 during the fiscal years ended January 26, 1997 and
January 28, 1996, respectively. Subsequent to January 26, 1997, the Company has
incurred additional net losses (unaudited). These factors raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

F-8
<PAGE> 46

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has issued an additional $3,433,000 in long-term financing and
equity funding subsequent to January 26, 1997 (note 11). Management plans to
pursue additional funds which will be used to open additional stores and fund
operating needs through further equity funding, other long-term financing plans
and a potential initial public offering. Management expects, although there can
be no assurance, that these funds will be sufficient for its operating needs
through July 31, 1998.

(k) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

(l) New Accounting Standards

Effective January 29, 1996, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (Statement No. 121). Statement No. 121
requires long-lived assets and certain identifiable intangibles to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. When it is determined that
an asset's estimated future net cash flows will not be sufficient to recover its
carrying amount, an impairment loss must be recorded to reduce the carrying
amount to its estimated fair value. The adoption of Statement No. 121 did not
have a material effect on the Company's consolidated financial position or
results of operations.

Effective January 29, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(Statement No. 123), which establishes financial accounting and reporting
standards for stock-based employee compensation plans. Statement No. 123 defines
a fair value based method of accounting for an employee stock option or similar
equity instrument and encourages the adoption of that method of accounting for
all employee stock option compensation plans. Statement No. 123 allows an entity
to continue to measure compensation cost for those plans using the intrinsic
value based method of accounting as prescribed by the Accounting Principles
Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees." The
Company elected to remain with the accounting method prescribed by APB No. 25.
Pro forma disclosures required by Statement No. 123 as if the fair value based
method of accounting had been adopted have not been presented in the
consolidated financial statements as the effect of such adoption would not have
been material.

(m) Reclassifications

Certain amounts in 1996 have been reclassified to conform with the 1997
presentation.

(n) Pro Forma Loss Per Share

Pro forma loss per common share is based on the weighted average number of
common and common equivalent shares outstanding adjusted for the effect of the
planned conversion of the Company's convertible debentures and all classes of
convertible preferred stock and related warrants, the retroactive effect of the
reverse stock split discussed in note 12 and stock options issued.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock, warrants, convertible securities and common stock options
issued during the twelve-month period prior to the initial filing of the
registration statement applicable to the contemplated initial public offering,
with issue or exercise prices below the assumed initial public offering price,
have been included in the calculation of

F-9
<PAGE> 47

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

common share equivalents, using the treasury stock method, as if they were
outstanding for all periods presented.

Pro forma net loss attributable to common stockholders used to calculate
the pro forma loss per share excludes $956,306 and $265,474 of interest expense
and amortization associated with debt issuance costs for the fiscal years ended
January 26, 1997 and January 28, 1996, respectively. The weighted average number
of common and common equivalent shares outstanding, as adjusted, were 7,485,484
and 6,141,658 for the fiscal years ended January 26, 1997 and January 28, 1996,
respectively.

(3) PROPERTY AND EQUIPMENT

Property and equipment consists of the following at January 26, 1997 and
January 28, 1996:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Automobiles......................................... $ 64,038 $ 64,038
Furniture and equipment............................. 1,183,742 1,020,357
Leasehold improvements.............................. 687,409 571,627
---------- ----------
1,935,189 1,656,022
Less accumulated depreciation and amortization...... (885,908) (450,777)
---------- ----------
$1,049,281 $1,205,245
========== ==========
</TABLE>

(4) GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets consist of the following at January
26, 1997 and January 28, 1996:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Goodwill............................................. $ 189,057 $ 189,057
Noncompete agreement................................. 60,000 60,000
Corporate trademark.................................. 50,000 50,000
--------- ---------
299,057 299,057
Less accumulated amortization........................ (176,270) (116,276)
--------- ---------
$ 122,787 $ 182,781
========= =========
</TABLE>

F-10
<PAGE> 48

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) NOTES PAYABLE

Notes payable consist of the following at January 26, 1997 and January 28,
1996:

<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Unsecured convertible subordinated debentures to various
individuals, bearing interest at 14% payable monthly, to
mature on June 30, 1999.................................. $ 4,865,000 $3,075,150
Unsecured convertible subordinated debentures to various
individuals, bearing interest at 14% payable monthly, to
mature on June 30, 2000.................................. 2,000,000 --
Unsecured convertible subordinated debentures to various
individuals, bearing interest at 14% payable monthly, to
mature on January 31, 2001 (note 11)..................... 461,000 --
Notes payable issued by PCI Finance 1995-I, Inc. to various
individuals, principal due in monthly installments
beginning October 15, 1997, bearing interest at 15%
payable monthly, to mature on March 31, 1998, secured by
pawn loans and associated collateral..................... 1,390,000 1,390,000
Notes payable issued by PCI Finance 1996-2, Inc. to various
individuals, principal due in monthly installments
beginning July 15, 2000, bearing interest at 15% payable
monthly, to mature on December 31, 2000, secured by pawn
loans and associated collateral (note 11)................ 220,000 --
Notes payable issued by PCI Finance 1996-1, Inc. to various
individuals, principal due in monthly installments
beginning October 15, 1999, bearing interest at 15%
payable monthly, to mature on March 31, 2000, secured by
pawn loans and associated collateral..................... 278,000 --
Notes payable issued by PCI Finance 1994-I, Inc. to various
individuals, principal due in quarterly installments
beginning July 1, 1997, bearing interest at 15% payable
monthly, to mature on December 31, 1997, secured by pawn
loans and associated collateral (see below).............. -- 980,000
Note payable to a bank, principal and interest due on
January 31, 1997, with interest at 8.75%, guaranteed by
an officer of the Company and secured by collateral of a
stockholder (see below).................................. 80,000 90,000
Note payable to a stockholder of the Company pursuant to a
$50,000 revolving line of credit, due on demand, with
interest at 15%, secured by certain property and
equipment................................................ 50,000 50,000
Other unsecured notes payable to stockholders.............. -- 53,100
----------- ----------
9,344,000 5,638,250
Less current portion............................. (1,056,667) (193,100)
----------- ----------
$ 8,287,333 $5,445,150
=========== ==========
</TABLE>

F-11
<PAGE> 49

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate sinking fund requirements and maturities of notes payable
subsequent to January 26, 1997 are as follows: 1998, $1,056,667; 1999, $463,333;
2000, $5,050,333, and 2001, $2,773,667.

On June 13, 1995, the Company began marketing a private placement offering
for up to $6,000,000 in principal amount of 14% unsecured Convertible
Subordinated Debentures due June 30, 1999 (1999 Debentures). The 1999 Debentures
are to be sold in minimum denominations of $1,000 with a minimum subscription of
$250,000 and a maximum subscription of $6,000,000. Interest on the 1999
Debentures is payable monthly commencing on August 15, 1995. At the option of
the holder, each 1999 Debenture is convertible at any time into shares of common
stock at a conversion price of $6.00, subject to adjustments should the Company
issue common stock dividends, initiate stock splits, or issue common stock
rights or warrants for the purchase of common stock at below market prices. In
the event that the Company consummates a publicly registered offering of at
least $5,000,000, each 1999 Debenture will be automatically converted into
shares of common stock at a stipulated conversion price. The 1999 Debentures may
be redeemed at the option of the Company, subject to certain notification
requirements, prior to the maturity date at a stipulated redemption price. At
January 26, 1997 and January 28, 1996, the Company had issued $4,865,000 and
$3,075,150, respectively, in 1999 Debentures.

On June 21, 1996, the Company began marketing a private placement offering
for up to $2,000,000 in principal amount of 14% unsecured Convertible
Subordinated Debentures due June 30, 2000 (2000 Debentures). The 2000 Debentures
are to be sold in minimum denominations of $1,000 with a minimum subscription of
$50,000 and a maximum subscription of $2,000,000. Interest on the 2000
Debentures is payable monthly commencing on August 15, 1996. At the option of
the holder, each 2000 Debenture is convertible at any time into shares of common
stock at a conversion price of $6.00, subject to adjustments should the Company
issue common stock dividends, initiate stock splits, or issue common stock
rights or warrants for the purchase of common stock at below market prices. In
the event that the Company consummates a publicly registered offering of at
least $5,000,000, each 2000 Debenture will be automatically converted into
shares of common stock at a stipulated conversion price. The 2000 Debentures may
be redeemed, subject to certain notification requirements, prior to the maturity
date at a stipulated redemption price. At January 26, 1997, $2,000,000 of 2000
Debentures had been issued.

On December 13, 1996, the Company began marketing a private placement
offering for up to $2,500,000 in principal amount of 14% unsecured Convertible
Subordinated Debentures due January 31, 2001 (2001 Debentures). The 2001
Debentures are to be sold in minimum denominations of $1,000 with a minimum
subscription of $50,000 and a maximum subscription of $2,500,000. Interest on
the 2001 Debentures is payable monthly commencing on February 15, 1997. At the
option of the holder, each 2001 Debenture is convertible at any time into shares
of common stock at a conversion price of $6.00, subject to adjustments should
the Company issue common stock dividends, initiate stock splits, or issue common
stock rights or warrants for the purchase of common stock at below market
prices. In the event that the Company consummates a publicly registered offering
of at least $5,000,000 at an offering price of $5.00 per share, each 2001
Debenture will be automatically converted into shares of common stock at a
stipulated conversion price. The 2001 Debentures may be redeemed, subject to
certain notification requirements, prior to the maturity date at a stipulated
redemption price. At January 26, 1997, $461,000 of 2001 Debentures had been
issued.

In connection with the sale of the 1999 Debentures, the Company has agreed
to issue warrants to purchase up to 200,000 shares of the Company's common stock
to participating National Association of Securities Dealers, Inc. broker-dealers
(NASD Broker-Dealers). The warrants have an exercise price of $7.20 per share
and are exercisable for four years commencing June 13, 1996. At January 26,
1997, 147,512 warrants had been granted in connection with the sale of the 1999
Debentures.

In connection with the sale of the 2000 Debentures, the Company has agreed
to issue warrants to purchase up to 66,667 shares of the Company's common stock
to participating NASD Broker-Dealers. The warrants have an exercise price of
$7.20 per share and are exercisable for four years commencing June 21,

F-12
<PAGE> 50

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1997. At January 26, 1997, 58,534 warrants had been granted in connection with
the sale of the 2000 Debentures.

In connection with the sale of the 2001 Debentures, the Company has agreed
to issue warrants to purchase up to 83,334 shares of the Company's common stock
to participating NASD Broker-Dealers. The warrants have an exercise price of
$7.20 per share and are exercisable for four years commencing December 13, 1997.
At January 26, 1997, 9,533 warrants had been granted in connection with the sale
of the 2001 Debentures.

At January 26, 1997, debt issuance costs totaling $885,100 have been paid
in connection with the sale of the 1999 Debentures, 2000 Debentures, 2001
Debentures, and notes payable issued by PCI Finance 1994-I, Inc., PCI Finance
1995-I, Inc., PCI Finance 1996-1, Inc., and PCI Finance 1996-2, Inc. Such
amounts are being amortized on a straight-line basis through the respective
maturity date of each debenture or notes payable. Amortization expense related
to debt issuance costs was $228,358 and $92,696 for the fiscal years ended
January 26, 1997 and January 28, 1996, respectively, and is included in interest
expense in the accompanying consolidated statements of operations.

During fiscal 1997, the Company repaid $411,000 in notes payable issued by
PCI Finance 1994-I, Inc. Additionally, $220,000, $249,000 and $100,000 in notes
payable issued by PCI Finance 1994-I, Inc. were converted to PCI Finance 1996-2,
Inc. notes payable, 2001 Debentures and 2000 Debentures, respectively.

On February 11, 1997, the $80,000 note payable to a bank was paid in full.

(6) INCOME TAXES

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at January 26,
1997 and January 28, 1996 are presented below:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................. $ 2,780,817 $ 1,652,322
Intangible assets................................ 43,531 28,722
----------- -----------
Total gross deferred tax assets............. 2,824,348 1,681,044
Less valuation allowance.................... (2,699,808) (1,585,258)
----------- -----------
Net deferred tax assets.................. 124,540 95,786
----------- -----------
Deferred tax liabilities:
Property and equipment........................... 124,540 95,786
----------- -----------
Total deferred tax liabilities.............. 124,540 95,786
----------- -----------
Net deferred tax assets (liabilities).... $ -- $ --
=========== ===========
</TABLE>

At January 26, 1997, the Company has net operating loss carryforwards for
tax purposes of approximately $7,500,000 which are available to offset future
federal taxable income, if any, through 2012. Deferred tax valuation allowances
of $2,699,808 and $1,585,258 offset deferred tax assets at January 26, 1997 and
January 28, 1996, respectively, based on management's determination that it is
more likely than not that such amounts may not be subsequently realized.

(7) EQUITY TRANSACTIONS

On July 22, 1994, the Company's Board of Directors authorized 1,925,000
shares of Series B Convertible Preferred stock to be issued through a private
placement offering to accredited investors in units of 25,000 shares at $2.00
per share with a minimum subscription of $300,000 and a maximum subscription of

F-13
<PAGE> 51

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$3,500,000. At January 26, 1997 and January 28, 1996, 1,046,000 shares had been
issued with net proceeds received by the Company under this offering totaling
$1,749,042.

During the fiscal years ended January 26, 1997 and January 28, 1996, the
Company issued 14,394 and 24,237 shares, respectively, of Series B Convertible
Preferred stock in connection with the Company's employee stock purchase plan
(note 10).

During the fiscal year ended January 28, 1996, the Company acquired 25,000
shares of Series B Convertible Preferred stock in exchange for the issuance of
$50,000 in 14% unsecured Convertible Subordinated Debentures due June 30, 1999.

During the fiscal year ended January 26, 1997, the Company acquired 15,000
shares of common stock from a former officer of the Company at a price of $1.00
per share, adjusted for the retroactive effect of the reverse stock split
described in note 12.

During the fiscal years ended January 26, 1997 and January 28, 1996, the
Company issued 130,298 and 233,984 shares, respectively, of the Company's common
stock to certain officers, employees and other individuals in exchange for
various services rendered on behalf of the Company. The Company has recorded
administrative expenses related to the issuance of such shares of $31,272 and
$4,180 during the fiscal years ended January 26, 1997 and January 28, 1996,
respectively.

During the fiscal year ended January 28, 1996, three stockholders performed
services for the Company without receiving compensation. The Company has
recorded $20,000 in administrative expenses during the fiscal year ended January
28, 1996 which represents the estimated value of the services contributed by the
stockholders with a corresponding increase to additional paid-in capital.

In January 1994, the Board of Directors authorized the issuance of a
warrant to purchase 50,000 shares of the Company's common stock at an exercise
price of $.02 per share to a former director. On December 29, 1995, the former
director exercised the warrant to purchase 25,000 shares of the Company's common
stock. The remaining warrants expired on January 20, 1996.

During fiscal 1995, the Company granted nonqualified stock options to
purchase an aggregate of 32,500 shares of the Company's common stock, at a price
of $.50 per share, to two former directors and nonqualified stock options to
purchase an aggregate of 12,500 shares of the Company's common stock, at a price
of $4.00 per share, to a former director. The options were exercisable over a
period commencing with the date of the agreement and ending April 19, 1997, at
which time all such options expired unexercised.

(8) PREFERRED STOCK

Each share of $.50 Series A Convertible Preferred stock (Series A) has a
liquidation preference of $.50 per share. Holders of Series A are not entitled
to receive any cash dividends. The Company is restricted from the declaration of
dividends to holders of common stock or any other class of stock of the Company
ranking junior to Series A as long as Series A is outstanding. At the option of
the holder, each share of Series A is convertible at any time into one share of
common stock at a conversion price of $1.00 per share, subject to adjustment
should the Company pay common stock dividends or initiate stock splits or
similar changes to its common stock immediately upon the earlier of (i) the date
specified by the vote or written consent or agreement of holders of at least a
majority of Series A or (ii) the closing of the sale of the Company's securities
in an underwritten public offering, the aggregate proceeds of which equal or
exceed $5,000,000. At the option of the Company, shares of Series A can be
redeemed at $1.00 per share. Holders have the option of converting such shares
into common stock in lieu of redemption, pursuant to certain requirements.

Each share of the Series B Convertible Preferred stock (Series B) has a
liquidation preference of $2.00 per share after considering the liquidation
preference for Series A. At the option of the holder, each

F-14
<PAGE> 52

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

share of Series B is convertible at any time into one share of common stock at a
conversion price of $4.00 per share, subject to adjustments should the Company
pay common stock dividends or initiate stock splits or similar changes to its
common stock. Each share of Series B shall automatically be converted into one
share of common stock immediately upon the earlier of (i) the date specified by
agreement of the holders of a majority of the shares of such series or (ii) the
closing of the sale of the Company's common stock in a public offering where the
aggregate proceeds exceed $5,000,000. At the option of the Company, subject to
certain notice requirements, shares of Series B can be redeemed at $4.00 per
share. Holders have the option of converting such shares into common stock in
lieu of redemption, pursuant to certain requirements.

In connection with the Series B offering, the Company has agreed to issue
Series B stock purchase warrants to participating NASD Broker-Dealers to
purchase up to 10% of the Series B shares sold by the NASD Broker-Dealers. The
warrants have an exercise price of $4.80 per share and are exercisable for four
years commencing July 22, 1995. At January 26, 1997, 40,425 warrants had been
granted.

(9) COMMITMENTS AND CONTINGENCIES

The Company is obligated under various long-term operating lease
agreements for store locations and office space. Total rent expense for all
operating leases, including leases with a related party, was approximately
$1,055,000 and $744,000 for the fiscal years ended January 26, 1997 and January
28, 1996, respectively.

Future minimum lease payments under noncancelable operating leases as of
January 26, 1997 are:

<TABLE>
<CAPTION>
FISCAL YEARS RELATED
ENDING JANUARY PARTY OTHER TOTAL
-------------- ------- --------- ---------
<S> <C> <C> <C>
1998.................................. $48,000 1,032,793 1,080,793
1999.................................. 48,000 1,026,329 1,074,329
2000.................................. -- 689,001 689,001
2001.................................. -- 376,153 376,153
2002.................................. -- 60,490 60,490
------- --------- ---------
Total minimum lease payments... $96,000 3,184,766 3,280,766
======= ========= =========
</TABLE>

The Company leases its Weatherford, Texas pawnshop from a joint venture
owned by certain stockholders of the Company. Rent expense related to this lease
totaled $48,000 during each of the fiscal years ended January 26, 1997 and
January 28, 1996.

The Company is involved in various claims and lawsuits arising in the
ordinary course of business. In the opinion of management, the resolution of
these matters will not have a material adverse effect on the Company's
consolidated financial statements.

(10) EMPLOYEE STOCK PURCHASE PLAN

Effective October 1, 1994, the Company established an employee stock
purchase plan (Plan) covering substantially all employees. The Plan allows
participating employees to purchase, through payroll deductions and Company
matches approved by the Board of Directors, shares of the Company's Series B
Convertible Preferred stock at a price of $2.50 per share. The Plan provides
limitations for annual offerings of the Company's Series B Convertible Preferred
stock subject to a cumulative limitation of 100,000 shares and provides for no
awards after December 31, 1997. The Company has issued 43,020 shares of its
Series B Convertible Preferred stock under the Plan as of January 26, 1997. The
Company has recorded $10,282 and $13,871 in compensation expense during the
fiscal years ended January 26, 1997 and January 28, 1996, respectively, which
represents the value of Company matches approved by the Board of Directors.

F-15
<PAGE> 53

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) SUBSEQUENT EVENTS

Subsequent to January 26, 1997, the Company issued 52,365 shares of the
Company's common stock to certain officers, employees and other individuals in
exchange for various services rendered on behalf of the Company.

On May 27, 1997, the Company began marketing a franchise offering circular
for the sale of single unit franchises for an initial per unit franchise fee of
$29,500 and a $10,000 software fee due upon signing of the franchise agreement.

On June 20, 1997, the Company's Board of Directors authorized the issuance
of 500,000 shares of Series C Convertible Preferred stock (Series C) with a par
value of $.01 per share. Holders of Series C are not entitled to receive any
cash dividends. Each share of Series C has a liquidation preference of $5.00 per
share and has the same ranking as Series A and Series B. At the option of the
holder, each share of Series C is convertible at any time into shares of common
stock at a conversion price of $5.00 per share, subject to adjustments should
the Company pay common stock dividends or initiate stock splits or similar
changes to its common stock. Each share of Series C shall automatically be
converted into one share of common stock immediately upon the earlier of (i) the
date specified by agreement of the holders of a majority of the shares of such
series or (ii) the closing of the sale of the Company's common stock in a public
offering where the aggregate proceeds exceed $5,000,000. At the option of the
Company, subject to certain notice requirements, shares of Series C can be
redeemed at $4.00 per share. Holders have the option of converting such shares
into common stock in lieu of redemption, pursuant to certain requirements. As of
August 21, 1997, 26,592 Series C shares had been issued in connection with the
Company's employee stock purchase plan.

On July 10, 1997, the Company's Board of Directors authorized the issuance
of 1,000,000 shares of 12% Series D Convertible Exchangeable Preferred stock
(Series D) with a par value of $.01 per share. Dividends on Series D are payable
in arrears in monthly installments when, and if, declared by the Board of
Directors. Each share of Series D has a liquidation preference of $2.00 per
share and has the same ranking as Series A, Series B, and Series C. At the
option of the holder, each share of Series D is convertible at any time into
shares of common stock at a conversion price of $4.00 per share, subject to
adjustments should the Company pay common stock dividends or initiate stock
splits or similar changes to its common stock. Each share of Series D shall
automatically be converted into one share of common stock immediately upon the
earlier of (i) the date specified by agreement of the holders of a majority of
the shares of such series or (ii) the closing of the sale of the Company's
common stock in a public offering where the aggregate proceeds exceed
$5,000,000. At the option of the Company, subject to certain notice
requirements, shares of Series D can be redeemed at $5.00 per share. Holders
have the option of converting such shares into common stock in lieu of
redemption, pursuant to certain requirements. As of August 21, 1997, 492,500
shares had been issued with net proceeds received by the Company totaling
$985,000.

As of August 21, 1997, the Company had issued $2,655,000 in 2001
Debentures. As of August 21, 1997, an additional 67,673 warrants to purchase the
Company's common stock had been granted to NASD Broker-Dealers (note 5).

As of August 21, 1997, PCI Finance 1996-2, Inc. had issued $474,000 in
principal amount of 15% secured notes due December 31, 2000.

(12) EVENTS SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT (UNAUDITED)

At the Company's October 16, 1997 "Annual Meeting of Stockholders," the
following were approved:

- The Company changed its name from PCI Capital Corporation to PawnMart,
Inc. This name change has been reflected throughout the consolidated
financial statements.

F-16
<PAGE> 54

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- The Company adopted a reverse stock split of its issued and outstanding
shares of common stock on a basis of one new share for each two shares
currently outstanding. The effect of the reverse stock split has been
accounted for retroactively to January 29, 1995 in the accompanying
consolidated financial statements and, accordingly, all applicable share
and per share amounts have been restated to reflect this reverse stock
split.

- The Company approved the 1997 Director Stock Option Plan and the 1997
Employee Stock Option Plan to reserve 400,000 and 750,000 shares,
respectively, of common stock for issuance thereunder.

- The Company amended the conversion price of the convertible subordinated
debentures to be the lower of $6.00 principal amount per share or 80
percent of the contemplated initial public offering stock price. Such
amendment is pending final approval of the subordinated debt holders.

F-17
<PAGE> 55

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JULY 27, 1997 AND JANUARY 26, 1997

ASSETS

<TABLE>
<CAPTION>
JULY 27, JANUARY 26,
1997 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 661,602 $ 142,993
Accounts receivable....................................... 21,954 22,735
Pawn service charges receivable........................... 244,144 229,918
Loans..................................................... 2,365,740 2,227,565
Inventories, net.......................................... 2,117,289 1,970,741
Prepaid expenses and other current assets................. 39,741 18,117
---------- ----------
Total current assets.............................. 5,450,470 4,612,069
---------- ----------
Property and equipment, net................................. 934,711 1,049,281
Goodwill and other intangible assets, net................... 92,790 122,787
Debt issuance costs, net.................................... 643,145 555,262
Other assets................................................ 141,251 134,296
---------- ----------
$7,262,367 $6,473,695
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses..................... $ 530,866 $1,297,729
Bank overdraft............................................ -- 109,915
Current installments of notes payable..................... 1,412,829 1,056,667
---------- ----------
Total current liabilities......................... 1,943,695 2,464,311
---------- ----------
Long-term notes payable, net of current installments........ 10,272,000 8,287,333
---------- ----------
Total liabilities................................. 12,215,695 10,751,644
---------- ----------
Stockholders' equity (deficit):
Preferred stock, $.01 par value; authorized 10,000,000
shares:
$.50 Series A Convertible Preferred stock; 2,000,000
shares issued and outstanding (liquidation preference
of $.50 per share).................................... 20,000 20,000
Series B Convertible Preferred stock; 1,091,520 and
1,089,020 shares issued at July 27, 1997 and January
26, 1997, respectively (liquidation preference of
$2.00 per share)...................................... 10,915 10,890
Series C Convertible Preferred stock; 26,592 shares
issued and outstanding at July 27, 1997 (liquidation
preference of $2.50 per share)........................ 266 --
12% Series D Convertible Exchangeable Preferred stock;
375,000 shares issued and outstanding at July 27, 1997
(liquidation preference of $2.00 per share)........... 3,750 --
Common stock, $.01 par value; authorized 20,000,000
shares; 2,821,317 and 2,797,703 shares issued and
outstanding at July 27, 1997 and January 26, 1997,
respectively........................................... 28,213 27,977
Additional paid-in capital................................ 4,085,734 3,266,280
Accumulated deficit....................................... (9,037,206) (7,538,096)
---------- ----------
(4,888,328) (4,212,949)
---------- ----------
Less treasury stock, at cost; 15,000 common shares and
25,000 Series B Convertible Preferred shares........... (65,000) (65,000)
---------- ----------
Total stockholders' deficit....................... (4,953,328) (4,277,949)
Commitments, contingencies and subsequent events
---------- ----------
$7,262,367 $6,473,695
========== ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

F-18
<PAGE> 56

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JULY 27, 1997 AND JULY 28, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Merchandise sales......................................... $ 3,104,876 $ 2,449,530
Pawn service charges...................................... 1,380,096 984,927
Other..................................................... 29,154 1,071
----------- -----------
Total revenues.................................... 4,514,126 3,435,528
Cost of sales............................................... 2,088,683 1,540,326
----------- -----------
2,425,443 1,895,202
----------- -----------
Expenses:
Operating................................................. 1,786,962 1,629,444
Interest.................................................. 869,787 598,355
Depreciation and amortization............................. 255,465 255,883
Administrative............................................ 1,012,339 959,578
----------- -----------
Total expenses.................................... 3,924,553 3,443,260
----------- -----------
Net loss.......................................... $(1,499,110) $(1,548,058)
=========== ===========
Pro forma loss per common share................... $ (0.10) $ (0.15)
=========== ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

F-19
<PAGE> 57

PAWNMART, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JULY 27, 1997 AND JULY 28, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,499,110) $(1,548,058)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 255,465 255,883
Amortization of debt issuance costs.................... 128,090 93,655
Common and preferred stock issued for services......... 4,751 31,272
Changes in operating assets and liabilities:
Accounts receivable.................................. 781 6,155
Pawn service charges receivable...................... (14,226) (1,573)
Inventories.......................................... (146,548) (175,524)
Prepaid expenses and other current assets............ (21,624) (25,201)
Other assets......................................... (6,955) 26,943
Accounts payable and accrued expenses................ (766,863) (80,352)
----------- -----------
Net cash used in operating activities............. (2,066,239) (1,416,800)
----------- -----------
Cash flows from investing activities:
Net increase in pawn loans................................ (138,175) (551,306)
Purchases of property and equipment....................... (110,898) (141,612)
----------- -----------
Net cash used in investing activities............. (249,073) (692,918)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable................... 2,448,000 2,411,950
Principal payments on notes payable....................... (107,171) (97,571)
Proceeds from issuance of common stock.................... 2,500 --
Payment of debt issuance costs............................ (215,973) (190,177)
Net proceeds from issuance of preferred stock............. 816,480 --
Decrease in bank overdraft................................ (109,915) (28,347)
----------- -----------
Net cash provided by financing activities......... 2,833,921 2,095,855
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 518,609 (13,863)
Cash and cash equivalents at beginning of period............ 142,993 126,918
----------- -----------
Cash and cash equivalents at end of period.................. $ 661,602 $ 113,055
=========== ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

F-20
<PAGE> 58

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 27, 1997

(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. The results of operations for
the six months ended July 27, 1997 and July 28, 1996 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"), formerly PCI Capital Corporation, 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 unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements for the fiscal year ended January 26,
1997 included elsewhere in the Prospectus.

(2) PRO FORMA LOSS PER SHARE

On October 16, 1997, the common stockholders of the Company approved a
reverse stock split of its issued and outstanding shares of common stock on a
basis of one new share for each two shares currently outstanding. The effect of
the reverse stock split has been accounted for retroactively to January 28, 1996
in the accompanying unaudited consolidated financial statements and,
accordingly, all applicable share and per share amounts have been restated to
reflect this effective reverse stock split.

Pro forma loss per share is based on the weighted average number of common
and common equivalent shares outstanding during each period, as adjusted for (i)
the reverse stock split approved on October 16, 1997, (ii) the effect of the
Company's planned conversion of all convertible debentures and all classes of
convertible preferred stock and related warrants in connection with the
contemplated initial public offering, and (iii) all stock options issued. The
weighted average number of common and common equivalent shares outstanding for
the six months ended July 27, 1997 and July 28, 1996 was 7,742,980 and
7,388,360, respectively.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock, options, warrants and convertible securities issued during
the twelve-month period prior to the initial filing of a registration statement
applicable to the contemplated initial public offering, with issue or exercise
prices below the assumed initial public offering price, have been included in
the calculation of common share equivalents, using the treasury stock method, as
if they were outstanding for all periods presented.

Pro forma net loss attributable to common stockholders used to calculate
the pro forma loss per common share excludes $692,424 and $424,551 of interest
expense and amortization of debt issuance costs for the six months ended July
27, 1997 and July 28, 1996, respectively, to give effect to the conversion of
$9.52 million principal amount of the Company's 14% Convertible Subordinated
Debentures due June 30, 1999, June 30, 2000 and January 31, 2001 as of the
beginning of the earliest period presented.

(3) NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
No. 128"), which is required to be adopted for financial statements issued for
annual or interim periods after December 15, 1997. The adoption of SFAS No. 128
will require a change in the presentation of earnings per share ("EPS") to
replace primary and fully diluted EPS with a presentation of basic and diluted
EPS and to restate EPS for all periods presented. The

F-21
<PAGE> 59

PAWNMART, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 27, 1997

adoption of SFAS No. 128 is not expected to have a material impact on the
Company's consolidated financial statements.

In February 1997, the FASB also issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS
No. 129"). SFAS No. 129 establishes standards for disclosing information about
an entity's capital structure and applies to all entities. SFAS No. 129
continues the previous requirements to disclose certain information about an
entity's capital structure found in APB Opinions No. 10, "Omnibus Opinion-1966",
and 15, "Earnings per Share", and FASB Statements of Financial Accounting
Standards No. 47, "Disclosure of Long-Term Obligations", for entities that were
subject to the requirements of those standards. SFAS No. 129 supersedes specific
disclosure requirements of APB Opinions 10 and 15 and SFAS No. 47 and
consolidates them for ease of retrieval and for greater visibility to non-public
entities. SFAS No. 129 is effective for financial statements for periods ending
after December 15, 1997. It is not expected that the Company will experience any
material revision in its disclosures when SFAS No. 129 is adopted.

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. SFAS No. 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an entity display
an amount representing total comprehensive income for the period in that
financial statement. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. SFAS No. 130 will have no impact
on the financial condition or results of operations of the Company, but will
require changes in the Company's disclosure and presentation requirements.

F-22
<PAGE> 60

======================================================

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF, ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 7
Use of Proceeds........................ 11
Dividend Policy........................ 11
Capitalization......................... 12
Dilution............................... 13
Selected Consolidated Financial Data... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 16
Business............................... 21
Management............................. 27
Certain Transactions................... 30
Principal Stockholders................. 30
Description of Capital Stock........... 31
Shares Eligible for Future Sale........ 33
Underwriting........................... 34
Legal Matters.......................... 36
Experts................................ 36
Financial Statements................... F-1
</TABLE>

---------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

======================================================

======================================================
2,000,000 SHARES
PAWNMART, INC.
COMMON STOCK
------------------------

PROSPECTUS
------------------------
COMVEST PARTNERS, INC.

, 1997

======================================================
<PAGE> 61

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("DGCL") permits a
corporation to indemnify a person who was or is a director, officer, employee,
or agent of a corporation or who serves at the corporation's request as a
director, officer, partner, proprietor, trustee, employee, or agent of another
corporation, partnership, trust, joint venture, or other enterprise (an "outside
enterprise"), who was, is, or is threatened to be named a defendant in a legal
proceeding by virtue of such person's position in the corporation or in an
outside enterprise, but only if the person acted in good faith and reasonably
believed, in the case of conduct in the person's official capacity, that the
conduct was in or, in the case of all other conduct, that the conduct was not
opposed to the corporation's best interest, and, in the case of a criminal
proceeding, the person had no reasonable cause to believe the conduct was
unlawful. A person may be indemnified within the above limitations against
judgments, fines, settlements, and reasonable expenses actually incurred.
Generally, an officer, director, agent, or employee of a corporation or a person
who serves at the corporation's request as an officer, director, agent, or
employee of an outside enterprise may not be indemnified, however, against
judgments, fines, and settlements incurred in a proceeding in which the person
is found liable to the corporation or is found to have improperly received a
personal benefit and may not be indemnified for expenses unless, and only to the
extent that, in view of all the circumstances, the person is fairly and
reasonably entitled to indemnification for such expenses. A corporation must
indemnify a director, officer, employee, or agent against reasonable expenses
incurred in connection with a proceeding in which the person is a party because
of the person's corporate position, if the person was successful, on the merits
or otherwise, in the defense of the proceeding. Under certain circumstances, a
corporation may also advance expenses to such person.

Section 145 of the DGCL also permits a corporation to purchase and maintain
insurance or to make other arrangements on behalf of any of the above persons
against any liability asserted against and incurred by the person in such
capacity, or arising out of the person's status as such a person, whether or not
the corporation would have the powers to indemnify the person against the
liability under applicable law.

The Company's Restated Certificate of Incorporation provides that the
Company's directors will have no personal liability to the Company or its
stockholders for monetary damages for breach of, or an alleged breach of, a
director's fiduciary duty of care. This provision has no effect on director
liability for (i) a breach of the directors' duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith that constitute a
breach of duty of a director or involving intentional misconduct or knowing
violations of law, (iii) approval of any transaction from which a director
derives an improper personal benefit, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute. In
addition, the Company's Restated Certificate of Incorporation provides that any
additional liabilities permitted to be eliminated by subsequent legislation will
automatically be eliminated without further stockholder vote, unless additional
stockholder approval is required by such legislation. The Company is generally
required to indemnify its directors, officers, employees, and agents against all
judgments, fines, settlements, legal fees, and other expenses incurred in
connection with pending or threatened legal proceedings because of the person's
position with the Company or another entity that the person serves at the
Company's request, subject to certain conditions, and to advance funds to enable
them to defend against such proceedings. Article X of the Company's Restated
Certificate of Incorporation permits the Company to enter into agreements with
its directors, officers, employees and agents to provide such indemnification as
deemed appropriate. Article X also provides that the Company may extend to its
directors and executive officers such indemnification and additional
indemnification.

The Company has entered into an indemnification agreement with certain of
its directors and officers. The form of indemnity agreement provides that each
such person will be indemnified to the full extent permitted by applicable law
against all expenses (including attorneys' fees), judgments, fines, penalties
and amounts paid in settlement of any threatened, pending or completed action,
suit or proceeding, on account of his services as a director and officer of the
Company or any other company or enterprise in which he is serving at the request
of the Company, or as a guarantor of any debt of the Company. To the extent the

II-1
<PAGE> 62

indemnification provided under the agreement exceeds that permitted by
applicable law, indemnification may be unenforceable or may be limited to the
extent it is found by a court of competent jurisdiction to be contrary to public
policy.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses to be incurred in connection
with this Registration Statement, all of which will be borne by the Company. All
of such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc.

<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
SEC Registration Fee........................................ $ 3,848.49
NASD Filing Fee............................................. $ 1,500.00
AMEX Listing Fee............................................ $ 37,500.00
Agent's Nonaccountable Expense Allowance.................... $150,000.00**
Printing and Engraving Expenses............................. *
Legal Fees and Expenses..................................... $100,000.00**
Accounting Fees and Expenses................................ $ 30,000.00**
Blue Sky Taxes, Fees and Expenses........................... $ 15,000.00**
Miscellaneous............................................... *
-----------
Total............................................. $350.000.00**
===========
</TABLE>

- ---------------

*To be supplied by amendment.
**Estimated amount.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, the Company has sold the securities listed
below pursuant to exemptions under the Securities Act.

1. During the fiscal year ending January 29, 1995, the Company sold
1,160,000 shares of Series A Convertible Preferred Stock at a price of $.50 per
share resulting in net proceeds of $570,248 to the Company after deduction of
$9,752 in offering costs. These issuances completed the Company's private
placement offering of up to 2,000,000 shares of such shares to accredited
investors.

2. On July 22, 1994, the Company's Board of Directors authorized 1,925,000
shares of Series B Convertible Preferred Stock ("Series B") to be issued through
a private placement offering to accredited investors. During the fiscal years
ending January 29, 1995 and January 28, 1996, the Company issued 1,046,000
Series B at a price of $2.00 per share. In connection with Series B issuances,
the Company paid $342,958 in underwriting commissions and has issued 40,425
Series B stock purchase warrants to participating National Association of
Securities Dealers, Inc. broker-dealers ("NASD Broker-Dealers"). The warrants
have an exercise price of $4.80 per share and are exercisable for four years
commencing July 22, 1995.

3. From June 1995 through April 1996, the Company made a private placement
offering to accredited investors for up to $6,000,000 in principal amount of 14%
unsecured Convertible Subordinated Debentures due June 30, 1999 ("1999
Debentures"). The total underwriting commissions associated with the 1999
Debentures were $437,600. As of January 26, 1997, the Company has sold
$4,865,000 in 1999 Debentures. In connection with the 1999 Debentures, the
Company has issued 147,512 Common Stock purchase warrants to participating NASD
Broker-Dealers. The warrants have an exercise price of $7.20 per share and are
exercisable for four years commencing June 13, 1996.

4. From June 1996 through January 1997, the Company made a private
placement offering to accredited investors for up to $2,000,000 in principal
amount of 14% unsecured Convertible Subordinated Debentures due June 30, 2000
("2000 Debentures"). The total underwriting commissions associated with the 2000
Debentures were $161,600. As of January 26, 1997, the Company has sold
$2,000,000 in 2000 Debentures. In

II-2
<PAGE> 63

connection with the 2000 Debentures, the Company has issued 58,534 Common Stock
purchase warrants to participating NASD Broker-Dealers. The warrants have an
exercise price of $7.20 per share and are exercisable for four years commencing
June 21, 1997.

5. From December 1996 through June 1997, the Company made a private
placement offering to accredited investors for up to $2,655,000 in principal
amount of 14% unsecured Convertible Subordinated Debentures due January 31, 2001
("2001 Debentures"). The total underwriting commissions associated with the 2001
Debentures were $231,600. As of October 20, 1997, the Company has sold
$2,655,000 in 2001 Debentures. In connection with the 2001 Debentures, the
Company has issued 77,206 Common Stock purchase warrants to participating NASD
Broker-Dealers. The warrants have an exercise price of $7.20 per share and are
exercisable for four years commencing December 13, 1997.

7. In June 1997, the Company's Board of Directors authorized the issuance
of up to 500,000 shares of Series C Convertible Preferred Stock ("Series C")
with a par value of $.01 per share to be issued to employees in connection with
the Company's employee stock purchase plan. The employee stock purchase plan
allows employees to purchase, through payroll deductions and Company matches
approved by the Board of Directors, shares of Series C at a price of $2.50 per
share. At June 23, 1997, the Company issued 26,592 Series C shares and, on
September 10, 1997, the Company issued 250 Series C shares with total proceeds
received by the Company from both issuances of $38,346.

8. In July 1997, the Company's Board of Directors authorized the issuance
of up to 1,000,000 shares of 12% Series D Convertible Exchangeable Preferred
Stock ("Series D") with a par value of $.01 per share to be issued to accredited
investors. From July 10, 1997 to October 3, 1997, the Company issued 492,500
Series D shares with total proceeds received by the Company of $985,000.

9. From January 13, 1994 through January 26, 1997, the Company issued
372,703 shares of Common Stock to certain officers, employees and other
individuals in exchange for various services rendered on behalf of the Company.
From January 27, 1997 to October 15, 1997, the Company issued 138,615 shares of
Common Stock to certain officers, employees and other individuals in exchange
for various services rendered on behalf of the Company. On May 8, 1997, the
Company issued 1,250 shares of Common Stock to an employee for $2.00 per share.

10. On December 29, 1995, a former director exercised a warrant to purchase
25,000 shares of the Company's Common Stock at $.02 per share.

11. From October 1994 to March 1995, the Company issued $980,000 in 15%
notes payable, to mature on December 31, 1997, to 14 non-accredited investors
and a class of accredited investors. From February 1995 to May 1995, the Company
issued $1,390,000 in 15% notes payable, to mature on March 31, 1998, to 20 non-
accredited investors and a class of accredited investors. From April 1996 to
August 1996, the Company issued $278,000 in 15% notes payable, to mature on
March 31, 2000 to 5 non-accredited investors and a class of accredited
investors. From January 1997 to July 1997, the Company issued $474,000 in 15%
notes payable, to mature on December 31, 2000 to 11 non-accredited investors and
a class of accredited investors.

12. From January 1995 through November 1996, the Company issued 43,020
Series B shares in connection with its employee stock purchase plan. The
employee stock purchase plan in effect during that time allowed employees to
purchase, through payroll deductions and Company matches approved by the Board
of Directors, shares of Series C at a price of $2.00 per share.

The sale of securities above were made in reliance upon Section 4(2) and
Regulation D of the Securities Act, which provide exemptions for transactions
not involving a public offering. The purchasers of securities described above
acquired them for their own account and not with a view to any distribution
thereof to the public. The certificates evidencing the securities bear legends
stating that the shares are not to be offered, sold or transferred other than
pursuant to an effective registration statement under the Securities Act, or an
exemption from such registration requirements.

II-3
<PAGE> 64

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 -- *Form of Underwriting Agreement
3.1 -- Amended and Restated Certificate of Incorporation
3.2 -- Second Amended and Restated Bylaws of the Company
4.1 -- *Form of Certificate evidencing Common Stock
4.2 -- *Form of Representative's Warrants
5 -- *Opinion of Jordaan, Howard & Pennington, PLLC as to the
validity of the issuance of the securities registered
hereby
10.1 -- *Form of Indemnity Agreement with Officers and Directors
10.2 -- 1997 PawnMart, Inc. Employee Stock Option Plan
10.3 -- *1997 PawnMart, Inc. Director Stock Option Plan
11 -- Statement re computation of per share earnings
21 -- *Subsidiaries of the small business issuer
23.1 -- Consent of KPMG Peat Marwick LLP, independent certified
public accountants
23.2 -- *Consent of Jordaan, Howard & Pennington, PLLC. (included
in the opinion filed as Exhibit 5 to this Registration
Statement)
24 -- Powers of Attorney of directors and officers of the
Registrant (included on the signature pages of this
Registration Statement)
27 -- *Financial Data Schedule (Filed in EDGAR version only)
</TABLE>

- ---------------

*To be filed by amendment.

ITEM 28. UNDERTAKINGS

The Company, a small business issuer, before the offering had not duty to
file reports with the Commission under section 13(a) or 15(d) of the Securities
Exchange Act of 1934 is registering equity securities for sale in an
underwritten offering. Therefore, the small business issuer will provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ( the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

For purposes of determining any liability under the Act, the information
omitted from the form of prospectus filed as a part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed
by the small business issuer pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Act shall be deemed to be part of the registration statement as of the time
it was declared effective. For the purpose of determining any liability under
the Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-4
<PAGE> 65

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, on October 22, 1997.

PAWNMART, INC.
(Registrant)

By: /s/ CARSON R. THOMPSON
----------------------------------
Carson R. Thompson
Chief Executive Officer
(Principal Executive Officer)

By: /s/ THOMAS W. WHITE
----------------------------------
Thomas W. White
Vice President -- Finance and
Accounting
(Principal Financial and
Accounting Officer)

POWER OF ATTORNEY

Each of the undersigned hereby appoints Carson R. Thompson and Thomas W.
White, and each of them acting individually, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, for and in their
name, place and stead of the undersigned, in any and all capacities to sign and
file with the Securities and Exchange Commission under the Securities Act of
1933, as amended, any and all amendments and exhibits to this Registration
Statement and any and all applications, instruments and other documents to be
filed with the Securities and Exchange Commission pertaining to the registration
of the securities covered hereby or the transactions contemplated herein.

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed below by the following persons on behalf of
the registrant and in the capacities and on the dates stated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ CARSON R. THOMPSON Chief Executive Officer, Director October 22, 1997
- ----------------------------------------------------- and Chairman of the Board
Carson R. Thompson

/s/ ROBERT BOURLAND, JR. President, Chief Operating Officer October 22, 1997
- ----------------------------------------------------- and Director
Robert Bourland, Jr.

/s/ THOMAS W. WHITE Vice President -- Finance and October 22, 1997
- ----------------------------------------------------- Accounting
Thomas W. White

/s/ RANDY HADEN Vice President -- Information October 22, 1997
- ----------------------------------------------------- Services
Randy Haden
</TABLE>

II-5
<PAGE> 66
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ROBERT E. CAMP Director October 22, 1997
- -----------------------------------------------------
Robert E. Camp

/s/ JAMES E. BERK Director October 22, 1997
- -----------------------------------------------------
James E. Berk

/s/ MONTY R. STANDIFER Director October 22, 1997
- -----------------------------------------------------
Monty R. Standifer

/s/ MARK E. KANE Director October 22, 1997
- -----------------------------------------------------
Mark E. Kane
</TABLE>

II-6
<PAGE> 67

INDEX TO EXHIBITS

- ---------------

*To be filed by amendment.

II-7

<PAGE> 1
EXHIBIT 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

PAWNMART, INC.

A DELAWARE CORPORATION
(ADOPTED AS OF OCTOBER 16, 1997)

The name of the corporation is PawnMart, Inc. (hereinafter referred to
as the "Corporation") The Corporation was originally incorporated under the
name PawnCo, Inc. The Corporation's original Certificate of Incorporation was
filed with the Secretary of State on January 1, 1994. The Corporation's name
was changed to PCI Capital Corporation by amendment to the original Certificate
of Incorporation. Such amendment was filed with the Secretary of State on June
14, 1994.

ARTICLE I

Name

The name of the corporation is PawnMart, Inc. (hereinafter referred to
as the "Corporation").

ARTICLE II
Registered Office

The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle 19805. The name of the registered agent of the Corporation at that
address is Corporation Service Company.

ARTICLE III
Purpose

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law").

ARTICLE IV
Capital Stock
The maximum number of shares of capital stock that the Corporation is
authorized to have
<PAGE> 2
outstanding at any one time is 30,000,000 shares, consisting of: (i) 5,907,142
shares of Preferred Stock, par value $0.01 per share (the "Blank Check
Preferred Stock"), (ii) 2,000,000 shares $.50 Series A Convertible Preferred
Stock, par value $0.01 per share (the "Series A Preferred Stock"), (iii)
1,066,858 shares of the Company's Series B Convertible Preferred Stock, par
value $0.01 per share (the "Series B Preferred Stock"), (iv) 26,000 of the
Company's Series C Convertible Preferred Stock, par value $0.01 per share (the
"Series C Preferred Stock"), and (v) 1,000,000 shares of the Company's Series D
Convertible Preferred Stock, par value $0.01 per share (the "Series D
Preferred Stock") and (vi) 20,000,000 shares of Common Stock, par value $0.01
per share (the "Common Stock")

Part A. Blank Check Preferred Stock.

(1) The Preferred Stock may be issued from time to time in one or
more classes, or series, the shares of each class or series to
have such designations and powers, preferences, and rights,
and qualifications, limitations, and restrictions thereof, as
are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series
adopted by the board of directors of the Corporation as
hereafter prescribed.

(2) Authority is hereby expressly granted to and vested in the
board of directors of the Corporation to authorize the
issuance of the Preferred Stock from time to time in one or
more classes or series, and with respect to each class or
series of the Preferred Stock, to fix and state by resolution
or resolutions from time to time adopted providing for the
issuance thereof the following:

(a) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be
without voting rights, and whether or not such class
or series is to be entitled to vote as a separate
class either alone or together with the holders of
one or more other classes or series of stock;

(b) the number of shares to constitute the class or
series and the designations thereof;

(c) the preferences, and relative, participating,
optional, or other special rights, if any, and the
qualifications, limitations, or restrictions thereof,
if any, with respect to any class or series;

(d) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation
or the holders thereof or upon the happening or any
specified event, and , if redeemable, the redemption
price or prices (which may be payable in the form of
cash, notes, securities, or other property), and the
time or times at which, and the terms and conditions
upon which, such shares shall be redeemable and the
manner of redemption;

Page 2
<PAGE> 3
(e) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking
funds to be applied to the purchase or redemption of
such shares for retirement, and, if such retirement
or sinking fund or funds are to be established, the
annual amount thereof, and the terms and provisions
relative to the operation thereof;

(f) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property,
the conditions upon which and the times when such
dividends are payable, the preference to or the
relation to the payment of dividends payable on any
other class or classes or series of stock, whether or
not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates
from which such dividends shall accumulate;

(g) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof
shall be entitled to receive upon the voluntary or
involuntary dissolution of, or upon any distribution
of the assets of, the Corporation;

(h) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof
or upon the happening of any specified event, shall
be convertible into or exchangeable for, the shares
of any other class or classes or of any other series
of the same or any other class or classes of stock,
securities, or other property of the Corporation and
the conversion price or prices or ratio or ratios or
the rate or rates at which such exchange may be made,
with such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or
resolutions; and

(i) such other special rights and protective provisions
with respect to any class or series as may to the
board of directors of the Corporation seem advisable.

(3) The shares of each class or series of the Preferred Stock may
vary from the shares of any other class or series thereof in
any or all of the foregoing respects. The board of directors
of the Corporation may increase the number of shares of the
Preferred Stock designated for any existing class or series by
a resolution adding to such class or series authorized and
unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the
Corporation may decrease the number of shares of the Preferred
Stock designated for any existing class or series by a
resolution subtracting from such classes or series authorized
and unissued shares of the Preferred Stock designated for such
existing class or series, and the shares so subtracted shall
become authorized, unissued, and undesignated shares of the
Preferred Stock.

Page 3
<PAGE> 4
Part B. Series A Preferred Stock.

The Series A Preferred Stock shall have such designations and powers,
preferences, and rights, and qualifications, limitations, and restrictions
thereof, as are stated and expressed in that certain Certificate of
Designations as filed by the Corporation with the office of the Secretary of
State of Delaware on February 10, 1994.

Page 4
<PAGE> 5

Part C. Series B Preferred Stock.

The Series B Preferred Stock shall have such designations and
powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and
expressed in that certain Certificate of Designations as filed
by the Corporation with the office of the Secretary of State
of Delaware on September 22, 1994.

Part D. Series C Preferred Stock.

The Series C Preferred Stock shall have such designations and
powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and
expressed in that certain Certificate of Designations as filed
by the Corporation with the office of the Secretary of State
of Delaware on September 17, 1997.

Part E. Series D Preferred Stock.

The Series D Preferred Stock shall have such designations and
powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and
expressed in that certain Certificate of Designations as filed
by the Corporation with the office of the Secretary of State
of Delaware.

Part F. Common Stock.

(1) Each share of Common Stock of the Corporation shall have
identical rights and privileges in every respect. The holders
of shares of Common Stock shall be entitled to vote upon all
matters submitted to a vote of the stockholders of the
Corporation and shall be entitled to one vote for each share
of Common Stock held.

(2) Subject to prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the
holders of shares of the Common Stock shall be entitled to
receive such dividends (payable in cash, stock, or otherwise)
as may be declared thereon by the board of directors at any
time and from time to time out of any funds of the Corporation
legally available therefor.

(3) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after
distribution in full of the preferential amounts, if any, to
be distributed to the holders of shares of the Preferred Stock
or any series thereof, the holders of shares of Common Stock
shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its
stockholders, ratably in proportion to the number of shares of
the Common Stock held by them. A liquidation, dissolution, or
winding-up of the Corporation, as such terms are used in

Page 5
<PAGE> 6
this Paragraph (3), shall not be deemed to be occasioned by or
to include any consolidation or merger of the Corporation,
with or into any other corporation or corporations or other
entity or a sale, lease, exchange, or conveyance of all or
part of the assets of the Corporation.

(4) On the effective date of this Amended and Restated Certificate
of Incorporation (the "Effective Date"), the number of
outstanding shares of Common Stock of the Corporation or held
in the treasury of the Corporation shall be reduced so that
each two (2) shares of Common Stock issued and outstanding or
held in the treasury of the Corporation will be automatically
reclassified, combined, and converted into one (1) share of
Common Stock, par value $.01 per share. No fractions of
shares will be issued, and on the Effective Date, stockholders
otherwise entitled to receive fractions of shares, unless and
until such fractions of shares are combined with other
fractions of shares resulting in full shares within a period
of time to be set by the Corporation's Board of Directors,
shall have no further interest as a stockholder in respect of
such fractions of shares and shall be entitled to receive from
the Corporation in cash the fair value, as determined by the
Board of Directors, of such fractions of shares. At the
Effective Date, each certificate representing shares of Common
Stock outstanding or held in treasury immediately prior to
such time shall represent one-half ( 1/2) of the shares of
Common Stock as set forth in such certificate. Effective at
the close of business on such date, the maximum number of
shares of Common Stock that the Corporation is authorized to
have outstanding at any one time shall continue to be
20,000,000 shares.

Part G. General.

(1) Subject to the foregoing provisions of this Amended and
Restated Certificate of Incorporation, the Corporation may
issue shares of its Blank Check Preferred Stock and Common
Stock from time to time for such consideration (not less than
par value thereof) as may be fixed by the board of directors
of the Corporation, which is expressly authorized to fix the
same in its absolute and uncontrolled discretion subject to
the foregoing conditions. Shares so issued for which the
consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be
liable to any further call or assessment thereon, and the
holders of such shares shall not be liable for any further
payments in respect of such shares.

(2) The Corporation shall have the authority to create and issue
rights and options entitling their holders to purchase shares
of the Corporation's capital stock of any class or series or
other securities of the Corporation, and such rights and
options shall be evidenced by instrument(s) approved by the
board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise
price, duration, times for exercise, and other terms of such
options or rights; provided, however, that the consideration
to be received for any shares of capital stock subject thereto
shall not be less than the par value thereof.

Page 6
<PAGE> 7

ARTICLE V
Existence

The Corporation is to have perpetual existence.

ARTICLE VI
By-laws

In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors of the Corporation is
expressly authorized to make, alter, amend, change, add to or repeal the
By-laws of the Corporation by the affirmative vote of a majority of the total
number of Directors then in office. Any alteration or repeal of the By-laws of
the Corporation by the stockholders of the Corporation shall require the
affirmative vote of at least a majority of the voting power of the then
outstanding shares of capital stock of the Corporation entitled to vote on such
alteration or repeal, subject to ARTICLE IX hereof and ARTICLE VII of the
Corporation's By-laws.

ARTICLE VII
Stockholders and Directors

Part A. Stockholder Action. Election of Directors need not be by
written ballot unless the By-laws of the Corporation so provide. Subject to any
rights of holders of any series of Preferred Stock, from and after the date on
which the Common Stock of the Corporation is registered pursuant to the
Securites Exchange Act of 1934, (i) any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be effected in
lieu thereof by any consent in writing by such stockholders, (ii) special
meetings of stockholders of the Corporation may be called only by either the
Board of Directors pursuant to a resolution adopted by the affirmative vote of
the majority of the total number of Directors then in office or by the chief
executive officer of the Corporation and (iii) advance notice of stockholder
nominations of persons for election to the Board of Directors of the
Corporation and of business to be brought before any annual meeting of the
stockholders by the stockholders of the Corporation shall be given in the
manner provided in the By-laws of the Corporation.

Part B. Number of Directors and Term of Office. Subject to any rights
of holders of any series of Preferred Stock to elect additional Directors under
specified circumstances, the number of Directors which shall constitute the
Board of Directors of the Corporation shall be fixed from time to time in the
manner set forth in the By-laws of the Corporation. The Directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. Membership in such class shall be as nearly equal in number as possible.
The term of office of the initial Class I Directors shall

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<PAGE> 8
expire at the annual election of Directors by the stockholders of the
Corporation in 1998, the term of office of the initial Class II Directors shall
expire at the annual election of Directors by the stockholders of the
Corporation in 1999 and the term of office of the initial Class III Directors
shall expire at the annual election of Directors by the stockholders of the
Corporation in 2000, or thereafter when their respective successors in each
case are elected by the stockholders and qualified, subject however, to prior
death, resignation, retirement, disqualification or removal from office for
cause. At each succeeding annual election of Directors by the stockholders of
the Corporation beginning in 1998, the Directors chosen to succeed those whose
terms then expire shall be identified as being of the same class as the
Directors they succeed and shall be elected for a term expiring at the third
succeeding annual election of Directors by the stockholders of the Corporation,
or thereafter when their respective successors in each case are elected by the
stockholders and qualified. If the number of Directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of Directors in each class as nearly equal as possible, and any
additional Director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case shall a decrease in the number
of Directors shorten the term of any incumbent Director.

Part C. Removal and Resignation. No Director may be removed from
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of Directors voting
together as a single class; provided, however, that if the holders of any class
or series of capital stock are entitled by the provisions of this Amended and
Restated Certificate (it being understood that any references to this Amended
and Restated Certificate shall include any duly authorized certificate of
designation) to elect one or more Directors, such Director or Directors so
elected may be removed without cause only by the vote of the holders of a
majority of the outstanding shares of that class or series entitled to vote.
Any Director may resign at any time upon written notice to the Corporation.

Part D. Vacancies and Newly Created Directorships. Subject to any
rights of holders of any series of Preferred Stock to fill such newly created
Directorships or vacancies, any newly created Directorships resulting from any
increase in the authorized number of Directors and any vacancies in the Board
of Directors resulting from death, resignation, disqualification or removal
from office for cause shall, unless otherwise provided by law or by resolution
approved by the affirmative vote of a majority of the total number of Directors
then in office, be filled only by resolution approved by the affirmative vote
of a majority of the total number of Directors then in office. Any Director so
chosen shall hold office until the next election of the class for which such
Director shall have been chosen, and until his successor shall have been duly
elected and qualified, unless he shall resign, die, become disqualified or be
removed for cause.

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<PAGE> 9
ARTICLE VIII
General Provisions

Part A. Dividends. The Board of Directors shall have authority
from time to time to set apart out of any assets of the Corporation otherwise
available for dividends a reserve or reserves as working capital or for any
other purpose or purposes, and to abolish or add to any such reserve or
reserves from time to time as said Board may deem to be in the interest of the
Corporation; and said Board shall likewise have power to determine in its
discretion, except as herein otherwise provided, what part of the assets of the
Corporation available for dividends in excess of such reserve or reserves shall
be declared in dividends and paid to the stockholders of the Corporation.

Part B. Issuance of Stock. The shares of all classes of stock of
the Corporation may be issued by the Corporation from time to time for such
consideration as from time to time may be fixed by the Board of Directors of
the Corporation, provided that shares of stock having a par value shall not be
issued for a consideration less than such par value, as determined by the
Board. At any time, or from time to time, the Corporation may grant rights or
options to purchase from the Corporation any shares of its stock of any class
or classes to run for such period of time, for such consideration, upon such
terms and conditions, and in such form as the Board of Directors may determine.
The Board of Directors shall have authority, as provided by law, to determine
that only a part of the consideration which shall be received by the
Corporation for the shares of its stock which it shall issue from time to time,
shall be capital; provided, however, that, if all the shares issued shall be
shares having a par value, the amount of the part of such consideration so
determined to be capital shall be equal to the aggregate par value of such
shares. The excess, if any, at any time, of the total net assets of the
Corporation over the amount so determined to be capital, as aforesaid, shall be
surplus. All classes of stock of the Corporation shall be and remain at all
times nonassessable.

The Board of Directors is hereby expressly authorized, in its
discretion, in connection with the issuance of any obligations or stock of the
Corporation (but without intending hereby to limit its general power so to do
in other cases), to grant rights or options to purchase stock of the
Corporation of any class upon such terms and during such period as the Board of
Directors shall determine, and to cause such rights to be evidenced by such
warrants or other instruments as it may deem advisable.

Part C. Inspection of Books and Records. The Board of Directors
shall have power from time to time to determine to what extent and at what
times and places and under what conditions and regulations the accounts and
books of the Corporation, or any of them, shall be open to the inspection of
the stockholders; and no stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by the laws
of the State of Delaware, unless and until authorized so to do by resolution of
the Board of Directors or of the stockholders of the Corporation.

Part D. Location of Meetings, Books and Records. Except as
otherwise provided in the By-laws, the stockholders of the Corporation and the
Board of Directors may hold their meetings and have an office or offices
outside of the State of Delaware and, subject to the provisions of the laws of
said State, may keep the books of the Corporation outside of said State at such
places as may, from time to time, be designated by the Board of Directors.

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<PAGE> 10
ARTICLE IX
Amendments

The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate in the manner now or
hereinafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding anything contained in this Restated Certificate
to the contrary, Parts A, B and C of ARTICLE IV, ARTICLE VII, ARTICLE X, and
this ARTICLE IX of this Restated Certificate shall not be altered, amended or
repealed and no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 662/3% of the voting power of the
then outstanding shares of capital stock of the Corporation entitled to vote on
such alteration, amendment or repeal, voting together as a single class (other
than any alteration or amendment to Part C of ARTICLE IV that increases the
authorized number of shares of Preferred Stock or Common Stock); provided
further that no amendment or waiver of any provision of Part B of ARTICLE IV
shall be effective without the prior approval of the holders of a majority of
the then outstanding Common Stock.

ARTICLE X
Liability

Part A. Limitation of Liability.

(1) To the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), and
except as otherwise provided in the Corporation's By-laws, no
Director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages arising from a breach
of fiduciary duty owed to the Corporation or its stockholders.

(2) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a Director of the Corporation existing
at the time of such repeal or modification.

Part B. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved
(including involvement as a witness) in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding"), by reason of
the fact that he or she is or was a Director or officer of the Corporation or,
while a Director or officer of the Corporation, is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a Director or officer or in any other capacity while serving as a Director
or officer, shall be indemnified and held harmless by the

Page 10
<PAGE> 11
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, excise exercise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Part C of this ARTICLE X with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Part B of this ARTICLE X shall be a contract
right and shall include the obligation of the Corporation to pay the expenses
incurred in defending any such proceeding in advance of its final disposition
(an "advance of expenses"); provided, however, that, if and to the extent that
the Delaware General Corporation Law requires, an advance of expenses incurred
by an indemnitee in his or her capacity as a Director or officer (and not in
any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this Part
B or otherwise. The Corporation may, by action of its Board of Directors,
provide indemnification to employees and agents of the Corporation with the
same or lesser scope and effect as the foregoing indemnification of Directors
and officers.

Part C. Procedure for Indemnification. Any indemnification of a
Director or officer of the Corporation or advance of expenses under Part B of
this ARTICLE X shall be made promptly, and in any event within forty-five days
(or, in the case of an advance of expenses, twenty days), upon the written
request of the Director or officer. If a determination by the Corporation that
the Director or officer is entitled to indemnification pursuant to this ARTICLE
X is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification
or advance of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within forty-five days (or, in the case of an advance
of expenses, twenty days), the right to indemnification or advances as granted
by this ARTICLE X shall be enforceable by the Director or officer in any court
of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his or her right to indemnification,
in whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of expenses where the undertaking
required pursuant to Part B of this ARTICLE X, if any, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation
to indemnify the claimant for the amount claimed, but the burden of such
defense shall be on the Corporation. Neither the failure of the Corporation

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<PAGE> 12
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct. The procedure for
indemnification of other employees and agents for whom indemnification is
provided pursuant to Part B of this ARTICLE X shall be the same procedure set
forth in this Part C for Directors or officers, unless otherwise set forth in
the action of the Board of Directors providing indemnification for such
employee or agent.

Part D. Insurance. The Corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him or her and incurred by him or
her in any such capacity, whether or not the Corporation would have the power
to indemnify such person against such expenses, liability or loss under the
Delaware General Corporation Law.

Part E. Service for Subsidiaries. Any person serving as a Director,
officer, employee or agent of another corporation, partnership, limited
liability company, joint venture or other enterprise, at least 50% of whose
equity interests are owned by the Corporation (a "subsidiary" for this ARTICLE
X) shall be conclusively presumed to be serving in such capacity at the request
of the Corporation.

Part F. Reliance. Persons who after the date of the adoption of
this provision become or remain Directors or officers of the Corporation or
who, while a Director or officer of the Corporation, become or remain a
Director, officer, employee or agent of a subsidiary, shall be conclusively
presumed to have relied on the rights to indemnity, advance of expenses and
other rights contained in this ARTICLE X in entering into or continuing such
service. The rights to indemnification and to the advance of expenses
conferred in this ARTICLE X shall apply to claims made against an indemnitee
arising out of acts or omissions which occurred or occur both prior and
subsequent to the adoption hereof.

Part G. Non-Exclusivity of Rights. The rights to indemnification and
to the advance of expenses conferred in this ARTICLE X shall not be exclusive
of any other right which any person may have or hereafter acquire under this
Restated Certificate or under any statute, by-law, agreement, vote of
stockholders or disinterested Directors or otherwise.

Part H. Merger or Consolidation. For purposes of this ARTICLE X,
references to the "Corporation" shall include, in addition to the resulting
Corporation, any constituent Corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
Directors,

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<PAGE> 13
officers and employees or agents, so that any person who is or was a Director,
officer, employee or agent of such constituent Corporation, or is or was
serving at the request of such constituent Corporation as a Director, officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under this ARTICLE X with
respect to the resulting or surviving Corporation as he or she would have with
respect to such constituent Corporation if its separate existence had
continued.

ARTICLE XI
Business Combinations

The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law ("DGCL").

WHEREAS, the Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions of Section 245 of the DGCL.

------------------------------------
Carson Thompson
Chief Executive Officer and Chairman

------------------------------------
Robert Bourland
Acting Secretary

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<PAGE> 1
EXHIBIT 3.2

SECOND AMENDED AND RESTATED BY-LAWS

PAWNMART, INC.

A DELAWARE CORPORATION
(ADOPTED AS OF OCTOBER 16, 1997)

ARTICLE I
OFFICES

Section 1. Registered Office. The registered office of PawnMart,
Inc. (the "Corporation") in the State of Delaware shall be located at 1013
Centre Road, in the City of Wilmington, Delaware, County of New Castle 19805.
The name of the Corporation's registered agent at such address shall be
Corporation Service Company. The registered office and/or registered agent of
the Corporation may be changed from time to time by action of the Board of
Directors.

Section 2. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or the business of the Corporation
may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS

Section 1. Annual Meeting. An annual meeting of the stockholders
shall be held each year within 150 days after the close of the immediately
preceding fiscal year of the Corporation or at such other time specified by the
Board of Directors for the purpose of electing Directors and conducting such
other proper business as may come before the annual meeting. At the annual
meeting, stockholders shall elect Directors and transact such other business as
properly may be brought before the annual meeting pursuant to Section 11 of
ARTICLE II hereof.

Section 2. Special Meetings. Special meetings of the stockholders may
only be called in the manner provided in the Restated Certificate of
Incorporation.

Section 3. Place of Meetings. The Board of Directors may designate
any place, either within or without the State of Delaware, as the place of
meeting for any annual meeting or for any special meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall
be the principal executive office of the Corporation. If for any reason any
annual meeting shall not be held during any year, the business thereof may be
transacted at any special meeting of the stockholders.

Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time and, in the case of special meetings,
<PAGE> 2
the purpose or purposes, of such meeting, shall be given to each stockholder
entitled to vote at such meeting not less than 10 nor more than 60 days before
the date of the meeting. All such notices shall be delivered, either personally
or by mail, by or at the direction of the Board of Directors, the chairman of
the board, the president or the secretary, and if mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, postage
prepaid, addressed to the stockholder at his, her or its address as the same
appears on the records of the Corporation. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened.

Section 5. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

Section 6. Quorum. The holders of a majority of the outstanding
shares of capital stock entitled to vote, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by the General Corporation Law of the State of Delaware or
by the Restated Certificate of Incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy
at the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place. When a specified item of business requires a vote by
a class or series (if the Corporation shall then have outstanding shares of
more than one class or series) voting as a class or series, the holders of a
majority of the shares of such class or series shall constitute a quorum (as to
such class or series) for the transaction of such item of business.

Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.

Section 8. Vote Required. When a quorum is present, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless (i) by express provisions of an applicable law or of the
Restated Certificate of Incorporation a different vote is required, in which
case such express provision shall govern and control the decision of such
question, or (ii) the subject matter is the
<PAGE> 3
election of Directors, in which case Section 2 of ARTICLE III hereof shall
govern and control the approval of such subject matter.

Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware, the Restated Certificate of
Incorporation of the Corporation or any amendments thereto or these By-laws,
every stockholder shall at every meeting of the stockholders be entitled to (i)
one vote in person or by proxy for each share of common stock (other than Class
B Common Stock) held by such stockholder and (ii) no vote in person or by proxy
for each share of Class B Common Stock held by such stockholder.

Section 10. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.

Section 11. Business Brought Before an Annual Meeting. At an annual
meeting of the stockholders, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
(ii) brought before the meeting by or at the direction of the Board of
Directors or (iii) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of
the Corporation, not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that in the event that less than 70 days' notice or
prior public announcement of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the date on which
such notice of the date of the annual meeting was mailed or such public
announcement was made. A stockholder's notice to the secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of
shares of the Corporation which are beneficially owned by the stockholder and
(iv) any material interest of the stockholder in such business. Notwithstanding
anything in these By-laws to the
<PAGE> 4
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this section. The presiding officer
of an annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this section; if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. For purposes of this section,
"public announcement" shall mean disclosure in a press release reported by Dow
Jones News Service, Associated Press or a comparable national news service.
Nothing in this section shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").

ARTICLE III
Directors

Section 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. In addition to such powers as are herein and in the Restated
Certificate of Incorporation expressly conferred upon it, the Board of
Directors shall have and may exercise all the powers of the Corporation,
subject to the provisions of the laws of Delaware, the Restated Certificate of
Incorporation and these By-laws.

Section 2. Number, Election and Term of Office. Subject to any rights
of the holders of any series of Preferred Stock to elect additional Directors
under specified circumstances, the number of Directors which shall constitute
the Board of Directors shall be fixed from time to time by resolution adopted
by the affirmative vote of a majority of the total number of Directors then in
office. The Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote in the election of Directors; provided that, whenever the holders of any
class or series of capital stock of the Corporation are entitled to elect one
or more Directors pursuant to the provisions of the Restated Certificate of
Incorporation of the Corporation (including, but not limited to, for purposes
of these By-laws, pursuant to any duly authorized certificate of designation),
such Directors shall be elected by a plurality of the votes of such class or
series present in person or represented by proxy at the meeting and entitled to
vote in the election of such Directors. The Directors shall be elected and
shall hold office only in the manner provided in the Restated Certificate of
Incorporation.

Section 3. Removal and Resignation. No Director may be removed from
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock
entitled to vote generally in the election of Directors voting together as a
single class; provided, however, that if the holders of any class or series of
capital stock are entitled by the provisions of the Restated Certificate of
Incorporation (it being understood that any references to the Restated
Certificate of Incorporation shall include any duly authorized certificate of
designation) to elect one or more Directors, such Director or Directors so
elected may be removed without cause only by the vote of the holders of a
majority of the outstanding shares of that class or series entitled to vote.
Any Director may resign at any time upon written notice to the Corporation.
<PAGE> 5
Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the total number of Directors may be filled only
in the manner provided in the Restated Certificate of Incorporation.

Section 5. Nominations.

(a) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to
serve as Directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting
of stockholders (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who
was a stockholder of record at the time of giving of notice
provided for in this By-law, who is entitled to vote generally
in the election of Directors at the meeting and who shall have
complied with the notice procedures set forth below in Section
5(b).

(b) In order for a stockholder to nominate a person for election
to the Board of Directors of the Corporation at a meeting of
stockholders, such stockholder shall have delivered timely
notice of such stockholder's intent to make such nomination in
writing to the secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation
(i) in the case of an annual meeting, not less than 60 nor
more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is changed by
more than 30 days from such anniversary date, notice by the
stockholder to be timely must be so received not later than
the close of business on the 10th day following the earlier of
the day on which notice of the date of the meeting was mailed
or public disclosure of the meeting was made, and (ii) in the
case of a special meeting at which Directors are to be
elected, not later than the close of business on the 10th day
following the earlier of the day on which notice of the date
of the meeting was mailed or public disclosure of the meeting
was made. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for
election as a Director at such meeting all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is
otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including such person's written
consent to being named in the proxy statement as a nominee and
to serving as a Director if elected); (ii) as to the
stockholder giving the notice (A) the name and address, as
they appear on the Corporation's books, of such stockholder
and (B) the class and number of shares of the Corporation
which are beneficially owned by such stockholder and also
which are owned of record by such stockholder; and (iii) as to
the beneficial owner, if any, on whose behalf the nomination
is made, (A) the name and address of such person and (B) the
class and number of shares of the Corporation which are
beneficially owned by such person. At the request of the Board
of Directors, any person nominated by the Board of Directors
for election as a Director shall furnish to the secretary of
the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the
nominee.
<PAGE> 6
(c) No person shall be eligible to serve as a Director of the
Corporation unless nominated in accordance with the procedures
set forth in this section. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the
procedures prescribed by this section, and if he should so
determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. A stockholder
seeking to nominate a person to serve as a Director must also
comply with all applicable requirements of the Exchange Act,
and the rules and regulations thereunder with respect to the
matters set forth in this section.

Section 6. Annual Meetings. The annual meeting of the Board of
Directors shall be held without other notice than this By-law immediately
after, and at the same place as, the annual meeting of stockholders.

Section 7. Other Meetings and Notice. Regular meetings, other than
the annual meeting, of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings of the Board of
Directors may be called by the chairman of the board, the president (if the
president is a Director) or, upon the written request of at least a majority of
the Directors then in office, the secretary of the Corporation on at least 24
hours notice to each Director, either personally, by telephone, by mail or by
telecopy.

Section 8. Chairman of the Board, Quorum, Required Vote and
Adjournment. The Board of Directors shall elect, by the affirmative vote of a
majority of the total number of Directors then in office, a chairman of the
board, who shall preside at all meetings of the stockholders and Board of
Directors at which he or she is present and shall have such powers and perform
such duties as the Board of Directors may from time to time prescribe. If the
chairman of the board is not present at a meeting of the stockholders or the
Board of Directors, the president (if the president is a Director and is not
also the chairman of the board) shall preside at such meeting, and, if the
president is not present at such meeting, a majority of the Directors present
at such meeting shall elect one of their members to so preside. A majority of
the total number of Directors then in office shall constitute a quorum for the
transaction of business. Unless by express provision of an applicable law, the
Restated Certificate of Incorporation or these By-laws a different vote is
required, the vote of a majority of Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, the Directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.

Section 9. Committees. The Board of Directors may, by resolution
passed by a majority of the total number of Directors then in office, designate
one or more committees, each committee to consist of one or more of the
Directors of the Corporation, which to the extent provided in such resolution
or these By- laws shall have, and may exercise, the powers of the Board of
Directors in the management and affairs of the Corporation, except as otherwise
limited by law. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Such committee or
<PAGE> 7
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
upon request.

Section 10. Committee Rules. Each committee of the Board of Directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the Board of
Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the Board of Directors, of such committee is or
are absent or disqualified, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.

Section 11. Communications Equipment. Members of the Board of
Directors or any committee thereof may participate in and act at any meeting of
such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear and speak with each other, and participation in the meeting
pursuant to this section shall constitute presence in person at the meeting.

Section 12. Waiver of Notice and Presumption of Assent. Any member of
the Board of Directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except
when such member attends for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened. Such member shall be conclusively presumed to have
assented to any action taken unless his or her dissent shall be entered in the
minutes of the meeting or unless his or her written dissent to such action
shall be filed with the person acting as the secretary of the meeting before
the adjournment thereof or shall be forwarded by registered mail to the
secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to any member who voted in favor of such
action.

Section 13. Action by Written Consent. Unless otherwise restricted by
the Restated Certificate of Incorporation, any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of such board or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board or committee.

ARTICLE IV
OFFICERS

Section 1. Number. The officers of the Corporation shall be elected
by the Board of Directors and shall consist of a chairman of the board, a chief
executive officer, a president, one or more vice-presidents, a secretary, a
chief financial officer and such other officers and assistant
<PAGE> 8
officers as may be deemed necessary or desirable by the Board of Directors. Any
number of offices may be held by the same person, except that neither the chief
executive officer nor the president shall also hold the office of secretary.
In its discretion, the Board of Directors may choose not to fill any office for
any period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.

Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
convenient. Vacancies may be filled or new offices created and filled at any
meeting of the Board of Directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.

Section 3. Removal. Any officer or agent elected by the Board of
Directors may be removed by the Board of Directors at its discretion, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed.

Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise may be filled by the
Board of Directors.

Section 5. Compensation. Compensation of all executive officers shall
be approved by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a Director of
the Corporation; provided however, that compensation of all executive officers
may be determined by a committee established for that purpose if so authorized
by the unanimous vote of the Board of Directors.

Section 6. Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and of the Board of Directors and
shall have such other powers and perform such other duties as may be prescribed
to him or her by the Board of Directors or provided in these By-laws.

Section 7. Vice-Chairman of the Board. Whenever the chairman of the
board in unable to serve, by reason of sickness, absence, or otherwise, the
vice- chairman shall have the powers and perform the duties of the chairman of
the board. The vice-chairman shall have such other powers and perform such
other duties as may be prescribed by the chairman of the board, the board of
directors or these By-laws.

Section 8. Chief Executive Officer. The chief executive officer shall
have the powers and perform the duties incident to that position. Subject to
the powers of the Board of Directors and the chairman of the board, the chief
executive officer shall be in the general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy making
officer. The chief executive officer shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or provided in
these By-laws. The chief executive officer is authorized to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some
<PAGE> 9
other officer or agent of the Corporation. Whenever the president is unable to
serve, by reason of sickness, absence or otherwise, the chief executive officer
shall perform all the duties and responsibilities and exercise all the powers
of the president.

Section 9. The President. The president of the Corporation shall,
subject to the powers of the Board of Directors, the chairman of the board and
the chief executive officer, have general charge of the business, affairs and
property of the Corporation, and control over its officers, agents and
employees. The president shall see that all orders and resolutions of the
Board of Directors are carried into effect. The president is authorized to
execute bonds, mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The president shall have such other powers and perform such
other duties as may be prescribed by the chairman of the board, the chief
executive officer, the Board of Directors or as may be provided in these By-
laws.

Section 10. Vice-Presidents. The vice-president, or if there shall
be more than one, the vice-presidents in the order determined by the Board of
Directors or the chairman of the board, shall, in the absence or disability of
the president, act with all of the powers and be subject to all the
restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the Board of Directors, the chairman
of the board, the chief executive officer, the president or these By-laws may,
from time to time, prescribe. The vice-presidents may also be designated as
executive vice-presidents or senior vice-presidents, as the Board of Directors
may from time to time prescribe.

Section 11. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the Board of Directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose or
shall ensure that his or her designee attends each such meeting to act in such
capacity. Under the chairman of the board's supervision, the secretary shall
give, or cause to be given, all notices required to be given by these By-laws
or by law; shall have such powers and perform such duties as the Board of
Directors, the chairman of the board, the chief executive officer, the
president or these By-laws may, from time to time, prescribe; and shall have
custody of the corporate seal of the Corporation. The secretary, or an
assistant secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature. The
assistant secretary, or if there be more than one, any of the assistant
secretaries, shall in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the Board of Directors, the chairman of
the board, the chief executive officer, the president, or secretary may, from
time to time, prescribe.

Section 12. The Chief Financial Officer. The chief financial officer
shall have the custody of the corporate funds and securities; shall keep full
and accurate all books and accounts of the Corporation as shall be necessary or
desirable in accordance with applicable law or generally
<PAGE> 10
accepted accounting principles; shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation as may be ordered by
the chairman of the board or the Board of Directors; shall cause the funds of
the Corporation to be disbursed when such disbursements have been duly
authorized, taking proper vouchers for such disbursements; and shall render to
the Board of Directors, at its regular meeting or when the Board of Directors
so requires, an account of the Corporation; shall have such powers and perform
such duties as the Board of Directors, the chairman of the board, the chief
executive officer, the president or these By-laws may, from time to time,
prescribe. If required by the Board of Directors, the chief financial officer
shall give the Corporation a bond (which shall be rendered every six years) in
such sums and with such surety or sureties as shall be satisfactory to the
Board of Directors for the faithful performance of the duties of the office of
chief financial officer and for the restoration to the Corporation, in case of
death, resignation, retirement or removal from office of all books, papers,
vouchers, money and other property of whatever kind in the possession or under
the control of the chief financial officer belonging to the Corporation.

Section 13. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.

Section 14. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the Corporation and of any person
hereby authorized to act in such officer's place during such officer's absence
or disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to any other officer or to any Director, or to any other
person selected by it.

ARTICLE V
CERTIFICATES OF STOCK

Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
the chairman of the board, the chief executive officer or the president and the
secretary or an assistant secretary of the Corporation, certifying the number
of shares owned by such holder in the Corporation. If such a certificate is
countersigned (i) by a transfer agent or an assistant transfer agent other than
the Corporation or its employee or (ii) by a registrar, other than the
Corporation or its employee, the signature of any such chairman of the board,
chief executive officer, president, secretary or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the Corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the Corporation, such certificate or
certificates may never the less be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer or officers of the Corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the books of the
<PAGE> 11
Corporation. Shares of stock of the Corporation shall only be transferred on
the books of the Corporation by the holder of record thereof or by such
holder's attorney duly authorized in writing, upon surrender to the Corporation
of the certificate or certificates for such shares endorsed by the appropriate
person or persons, with such evidence of the authenticity of such endorsement,
transfer, authorization and other matters as the Corporation may reasonably
require, and accompanied by all necessary stock transfer stamps. In that
event, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate or certificates and
record the transaction on its books. The Board of Directors may appoint a bank
or trust company organized under the laws of the United States or any state
thereof to act as its transfer agent or registrar, or both in connection with
the transfer of any class or series of securities of the Corporation.

Section 2. Lost Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a
bond sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any
such certificate or the issuance of such new certificate.

Section 3. Fixing a Record Date for Stockholder Meetings. In order
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than 10
days before the date of such meeting. If no record date is fixed by the Board
of Directors, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be the close of business on
the next day preceding the day on which notice is first given. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.

Section 4. Fixing a Record Date for Other Purposes. In order that
the Corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment or any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.

Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such
<PAGE> 12
share or shares, the Corporation may treat the registered owner as the person
entitled to receive dividends, to vote, to receive notifications and otherwise
to exercise all the rights and powers of an owner. The Corporation shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof.

Section 6. Subscriptions for Stock. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the Board of Directors. Any call made by the Board of Directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any
installment or call when such payment is due, the Corporation may proceed to
collect the amount due in the same manner as any debt due the Corporation.

ARTICLE VI
GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, in accordance with applicable law. Dividends may be paid
in cash, in property or in shares of the capital stock, subject to the
provisions of the Restated Certificate of Incorporation. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or any other purpose and the Directors may modify
or abolish any such reserve in the manner in which it was created.

Section 2. Checks, Drafts or Orders. All checks, drafts or other
orders for the payment of money by or to the Corporation and all notes and
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation, and in
such manner, as shall be determined by resolution of the Board of Directors or
a duly authorized committee thereof.

Section 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize
any officer or officers, or any agent or agents, of the Corporation to enter
into any contract or to execute and deliver any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.

Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.

Section 5. Corporate Seal. The Board of Directors may provide a
corporate seal which shall
<PAGE> 13
be in the form of a circle and shall have inscribed thereon the name of the
Corporation and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.

Section 6. Voting Securities Owned By Corporation. Voting securities
in any other Corporation held by the Corporation shall be voted by the chief
executive officer, the president or a vice-president, unless the Board of
Directors specifically confers authority to vote with respect thereto, which
authority may be general or confined to specific instances, upon some other
person or officer. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.

Section 7. Inspection of Books and Records. The Board of Directors
shall have power from time to time to determine to what extent and at what
times and places and under what conditions and regulations the accounts and
books of the Corporation, or any of them, shall be open to the inspection of
the stockholders; and no stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by the laws
of the State of Delaware, unless and until authorized so to do by resolution of
the Board of Directors or of the stockholders of the Corporation.

Section 8. Section Headings. Section headings in these By-laws are
for convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.

Section 9. Inconsistent Provisions. In the event that any provision
of these By-laws is or becomes inconsistent with any provision of the Restated
Certificate of Incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these By-laws shall not
be given any effect to the extent of such inconsistency but shall otherwise be
given full force and effect.

ARTICLE VII
AMENDMENTS

In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
make, alter, amend, change, add to or repeal these By-laws by the affirmative
vote of a majority of the total number of Directors then in office. Any
alteration or repeal of these By-laws by the stockholders of the Corporation
shall require the affirmative vote of a majority of the outstanding shares of
the Corporation entitled to vote on such alteration or repeal; provided,
however, that Section 11 of ARTICLE II and Sections 2, 3, 4 and 5 of ARTICLE
III and this ARTICLE VII of these By-laws shall not be altered, amended or
repealed and no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 66 2/3% of the outstanding shares
of the Corporation entitled to vote on such alteration or repeal.

<PAGE> 1
EXHIBIT 10.2

PCI CAPITAL CORPORATION

1997 EMPLOYEE STOCK OPTION PLAN

Adopted May 29, 1997

1. PURPOSES.

(a) The purpose of the Plan is to provide a means by which
selected Employees and Consultants to the Company, and its Affiliates, may be
given an opportunity to purchase stock of the Company.

(b) The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees and
Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

(c) The Company intends that the Options issued under the Plan
shall, at the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either Incentive Stock Options or Nonstatutory Stock Options. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to section 6,
and a separate certificate of certificates will be issued for shares purchased
on exercise of each type of Option.

2. DEFINITIONS.

(a) "Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.

(e) "Company" means PCI Capital Corporation, a Delaware
corporation.

(f) "Consultant"" means any person, including an advisor, engaged
by the Company or an Affiliate to render services and who is compensated for
such services, provided that the term "consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
<PAGE> 2
(g) "Continuous Status as an Employe or Consultant" means the
employment or relationship as a Consultant is not interrupted or terminated by
the Company or any Affiliate. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates
or their successors.

(h) "Director" means a member of the Board.

(i) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.

(j) "Disinterested Person" means a Director: (i) who was not
during the one (1) year prior to service as an administrator of the Plan
granted or awarded equity securities pursuant to the Plan or any other plan of
the Company or any of its affiliates entitling the participants therein to
acquire equity securities of the Company or any of its affiliates except as
permitted by Rule 16b-3(c)(2)(i); or (ii) who is otherwise considered to be a
"disinterested person" in accordance with Rule 16b-3(c)(2)(i), or any other
applicable rules, regulations or interpretations of the Securities and Exchange
Commission.

(k) "Employee" means any person, including Officers employed by
the Company or any Affiliate of the Company. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.

(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(m) "Fair Market Value" means the value of the common stock as
determined in good faith by the Board.

(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

(p) "Officer" means a person who is an officer of the company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

(q) "Option" means a stock option granted pursuant to the Plan.

(r) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.

2
<PAGE> 3
(s) "Optioned Stock" means the common stock of the Company subject
to the Option.

(t) "Optionee" means an Employee or Consultant who holds an
outstanding Option.

(u) "Plan" means this 1997 Employee Stock Option Plan.

(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

3. ADMINISTRATION.

(a) The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).

(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Options, when and how each
Option shall be granted; whether an Option will be an Incentive Stock
Option or a Nonstatutory Stock Option; the provisions of each Option
granted (which need not be identical), including the time or times
such Option may be exercised in whole or in part; and the number of
shares for which an Option shall be granted to each such person.

(2) To construe and interpret the Plan and Options
granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of
this power, may correct any defect, omission or inconsistency in the
Plan or in any Option Agreement, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

(3) To amend the Plan as provided in Section 11.

(4) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the
best interests of the Company.

(c) The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee shall be Disinterested Persons, if required
under subsection 3(d). If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board (and references in this Plan to the
Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the

3
<PAGE> 4
Committee at any time and revest in the Board the administration of the Plan.
Additionally, prior to the date of the first registration of any equity
security of the Company under Section 12 of the Exchange Act, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to any person or persons and the term
"Committee" shall apply to any person or persons to whom such authority has
been delegated.

(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply (i) prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, or (ii) if the Board or the Committee expressly declares that
such requirement shall not apply. Any Disinterested Person shall otherwise
comply with the requirements of Rule 16b-3.

4. SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to
Options shall not exceed in the aggregate 1,500,000 shares of the Company's
common stock. If any Option shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not purchased under such
Option shall revert to and again become available for issuance under the Plan.

(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees or Consultants.

(b) A Director shall in no event be eligible for the benefits of
the Plan unless at the time discretion is exercised in the selection of the
Director as a person to whom Options may be granted, or in the determination of
the number of shares which may be covered by Options granted to the Director:
(i) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (ii) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This subsection 5(b)
shall not apply (i) prior to the date of the first registration of an equity
security of the Company under Section 12 of the Exchange Act, or (ii) if the
Board or Committee expressly declares that it shall not apply.

(c) No person shall be eligible for the grant of an Incentive
Stock Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock

4
<PAGE> 5
of the Company or of any of its Affiliates unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

(a) Term. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.

(b) Price. The exercise price of each Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the stock subject
to the Option on the date the Option is granted.

(c) Consideration. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant
or exercise of the Option, (A) by delivery to the Company of other common stock
of the Company, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subsection 6(d), or (C) in any
other form of legal consideration that may be acceptable to the Board.

In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions
of the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.

(d) Transferability. An Incentive Stock Option shall not be
transferrable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferrable except by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order, as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the rules thereunder
(a "QDRO"), and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person or any transferee pursuant to a QDRO.

5
<PAGE> 6
(e) Vesting. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The vesting provisions of individual Options may vary but in
each case will provide for vesting of at least twenty percent (20%) of the
total number of shares subject to the Option per year. During the remainder of
the term of the Option (if its term extends beyond the end of the installment
periods), the Option may be exercised from time to time with respect to any
shares then remaining subject to the Option. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of
shares as to which an Option may be exercised.

(f) Securities Law Compliance. The Company may require any
Optionee, or any person to whom an Option is transferred under subsection 6(d),
as a condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matter, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Program as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

(g) Termination of Employment or Relationship as a Consultant. In
the event an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option but only with such period of time as is
determined by the Board, which in no event shall be less than thirty (30) days,
and only to the extent that the Optionee was entitled to exercise it at the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement). If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate,

6
<PAGE> 7
and the shares covered by such Option shall revert to and again become
available for issuance under the Plan.

(h) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within twelve
(12) months from the date of such termination (or such longer or shorter
period, and only to the extent that the Optionee was entitled to exercise it at
the date of such termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available shall revert to and again become available
for issuance under the Plan.

(i) Death of Optionee. In the event of an Optionee, the Option
may be exercised, at any time within eighteen (18) months following the date of
death (or such longer or shorter period specified in the Option Agreement) (but
in no event later than the expiration of the term of such Option as set forth
in the Option Agreement, by the Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee was entitled to exercise the Option at the date of death.
If, at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.

(j) Early Exercise. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any invested shares so
purchased may be subject to a repurchase right in favor of the Company or to
any other restriction the Board determines to be appropriate.

(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following
means or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the participant as a result of the exercise of the
Option; or (3) delivering to the Company owned and unencumbered shares of the
common stock of the Company.

7
<PAGE> 8
7. COVENANTS OF THE COMPANY.

(a) During the terms of the Options, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Options.

(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the Options;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Option or any stock
issued or issuable pursuant to any such Option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.

8. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

9. MISCELLANEOUS.

(a) The Board shall have the power to accelerate the time at which
an Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions
in the Option stating the time at which it may first be exercised or the time
during which it will vest.

(b) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.

(c) Throughout the term of any Option, the Company shall deliver
to the holder of such Option, not later than one hundred twenty (120) days
after the close of each of the Company's fiscal years during the Option term,
such financial and other information regarding the Company as comprises the
annual report to the stockholders of the Company provided for in the bylaws of
the Company.

(d) Nothing in the Plan or any instrument executed or Option
granted pursuant thereto shall confer upon any Employee or Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate
(or to continue acting as a Consultant) or shall affect the right of the

8
<PAGE> 9
Company or any Affiliate to terminate the employment or relationship as a
Consultant of any Employee, Consultant or Optionee with or without cause.

(e) To the extent that the aggregate Fair Market Value (determined
at the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during
any calendar year under all plans of the Company and its Affiliates exceeds One
Hundred Thousand Dollars ($100,000.00), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.

10. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock subject to the Plan, or
subject to any Option (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan and outstanding Options will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Options.

(b) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; or (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then to
the extent permitted by applicable law; (i) any surviving corporation shall
assume any Options outstanding under the Plan or shall substitute similar
Options for those outstanding under the Plan, or (ii) such Options shall
continue in full force and effect. In the event any surviving corporation
refuses to assume or continue such Options, or to substitute similar options
for those outstanding under the Plan, then, with respect to Options held by
persons then performing services as Employees or Consultants, the time during
which such Options may be exercised shall be accelerated and the Options
terminated if not exercised prior to such event.

11. AMENDMENT OF THE PLAN.

(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 10 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:

(1) Increase the number of shares reserved for Options
under the Plan;

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<PAGE> 10
(2) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code); or

(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the
requirements of Rule 16b-3.

(b) It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide Optionees with
the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under
it into compliance therewith.

(c) Rights and obligations under any Option granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to whom the
Option was granted and (ii) such person consents in writing.

12. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on May 28, 2007, which shall
be within ten (10) years from the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Options
may be granted under the Plan while the Plan is suspended or after it is
terminated.

(b) Rights and obligations under any Option granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Option was granted.

13. CHANGE-OF-CONTROL

(a) Notwithstanding anything contained in this Plan or any Option
Agreement to the contrary, in the event of a Change of Control, as defined
below, any of the following may, in the sole discretion of the Option
Committee, occur with respect to any Option outstanding as of such Change of
Control:

(i) the time periods for exercising or realizing and vesting
periods of Options will be accelerated, restrictions will
lapse and performance standards will be deemed to have been
attained so that such Options may be immediately exercised,
realized or vested in full on or before the relevant date
fixed in the Option Agreement;

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<PAGE> 11
(ii) upon exercise of an Option during the 60-day period from and
after the date of a Change of Control, the Optionee exercising
the Option may in lieu of the receipt of Common Stock upon the
exercise of the Option, elect by written notice to the
Corporation to receive an amount in cash equal to the excess
of the aggregate value (as defined below) of the shares of
Common Stock covered by the Option or portion thereof
surrendered determined on the date the Option is exercised,
over the aggregate exercise price of the Option (such excess
is referred to herein as the "Aggregate Spread"); provided,
however, and notwithstanding any other provision of this Plan,
if the end of such 60-day period from and after the date of a
Change of Control is within six months of the date of grant of
an Option held by an Optionee who is an officer or director of
the Corporation subject to the reporting requirements of
Section 16 of the Exchange Act (a "Reporting Person"), such
Option shall be canceled in exchange for a cash payment to the
Optionee equal to the Aggregate Spread on the day which is six
months and one day after the date of grant of such Option. As
used in this Section 11(a)(iii) the term "Value" means the
higher of (i) the highest Fair Market Value during the 60-day
period from and after the date of a Change of Control and (ii)
if the Change of Control is the result of a transaction or
series of transactions described in paragraphs (i) or (iii) of
the definition of Change of Control, the highest price per
share of the Common Stock paid in such transaction or series
of transactions (which in the case of paragraph (i) shall be
the highest price per share of the Common Stock as reflected
in a Schedule 13D filed by the person having made the
acquisition);

(iii) if an Optionee's employment terminates for any reason
other than retirement or death following a Change of Control,
any options held by such Optionee may be exercised by such
Optionee until the earlier of three months after the
termination of employment or the expiration date of such
options; and

(v) all outstanding Options shall become non-cancelable.

(b) A "Change of Control" of the Company, unless otherwise
determined by the Board, shall be deemed to have occurred upon
the happening of any of the following events:

(i) the acquisition, other than from the Company, by any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership of 50% or more of either the
then outstanding shares of Common Stock of the
Company or the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors;
provided, however, that any acquisition by the
Company or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its
subsidiaries, or any corporation with respect to
which following such acquisition, more than

11
<PAGE> 12
50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined
voting power of the then outstanding voting
securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Common Stock and voting securities of the Company
immediately prior to such acquisition in
substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then
outstanding shares of Common Stock of the Company or
the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors, as the case
may be, shall not constitute a Change of Control;

(ii) individuals who, as of May 1, 1997, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided
that any individual becoming a director subsequent to
such date whose election, or nomination for election
by the Company's shareholders, was approved by a vote
of at least a majority of the directors then
comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of the directors of
the Company (as such terms are used in rule 14a-11 of
Regulation 14A promulgated under the Exchange Act);
or

(iii) approval by the shareholders of the Company of a
reorganization, merger or consolidation of the
Company, in each case, with respect to which the
individuals and entities who were the respective
beneficial owners of the Common Stock and voting
securities of the Company immediately prior to such
reorganization, merger or consolidation do not,
following such reorganization, merger or
consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of Common Stock and the combined
voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the corporation
resulting from such reorganization, merger or
consolidation, or a complete liquidation or
dissolution of the Company or of the sale or other
disposition of all or substantially all of the assets
of the Company.

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<PAGE> 13
14. EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.

<PAGE> 1
EXHIBIT 11

PAWNMART, INC.
COMPUTATION OF PRO FORMA LOSS PER COMMON SHARE

<TABLE>
<CAPTION>
Years Ended Six Months Ended
--------------------------------------------------------
January 28, January 26, July 28, July 27,
1996 1997 1996 1997
----------- ----------- ----------- -----------

<S> <C> <C> <C> <C>
Common shares outstanding at the beginning of the period (1) 2,433,421 2,667,405 2,667,405 2,797,703

Common equivalent shares attributed to stock options, warrants, and
convertible securities (2) 3,582,168 4,718,174 4,651,277 4,945,277

Weighted average number of shares issued during the period 126,069 99,905 69,678 --

----------- ----------- ----------- -----------
Weighted average number of common and common equivalent
shares outstanding at end of period (2) 6,141,658 7,485,484 7,388,360 7,742,980
=========== ========== =========== ===========

Net Loss As Reported $(2,827,627) $(3,056,315) $(1,548,058) $(1,499,110)

Pro Forma Adjustments (3) -
Interest Expense and Amortization of Debt Issuance Costs 265,474 956,306 424,551 692,424
----------- ----------- ----------- -----------
Pro Forma Net Loss $(2,562,153) $(2,100,009) $(1,123,507) $ (806,686)
=========== ========== =========== ===========

----------- ----------- ----------- -----------
Pro Forma Net Loss Per Share (2)(3) $ (0.42) $ (0.28) $ (0.15) $ (0.10)
=========== ========== =========== ===========
</TABLE>

(1) Gives effect to a 1-for-2 reverse stock split of the Company's outstanding
shares of Common Stock.

(2) Pro forma loss per common share is based on the weighted average number of
common and common equivalent shares outstanding, adjusted for (i) the
reverse stock split approved on October 16, 1997, (ii) the effect of the
Company's planned conversion of all convertible debentures and all classes
of convertible preferred stock and related warrants in connection with the
contemplated initial public offering, and (iii) all stock options issued.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock, options, warrants and convertible securities issued
during a twelve-month period prior to the initial filing of a registration
statement applicable to the contemplated initial public offering, with
exercise prices below the assumed initial public offering price, have been
included in the calculation of common share equivalents, using the treasury
stock method, as if they were outstanding for all periods presented.

(3) Pro forma net loss attributable to common stockholders used to calculate
the pro forma loss per share excludes $265,474, $956,306, $424,551 and
$692,424 of interest and amortization of debt issuance costs for the fiscal
years ended January 28, 1996 and January 26, 1997 and for the six months
ended July 28, 1996 and July 27, 1997, respectively. The pro forma
adjustments result from the retroactive effect of the Debenture Conversion.

<PAGE> 1
Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
PawnMart, Inc.:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus. Our report dated June 27,
1997, except for the last four paragraphs of note 11 which are as of August 21,
1997, contains an explanatory paragraph that states that the Company has
suffered recurring losses from operations, has experienced negative cash flows
from operating activities, and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

KPMG Peat Marwick LLP
Fort Worth, Texas
October 20, 1997