PAWNMART INC, SB-2/A, 1998-01-15

PAWNMART INC
SB-2/A, 1998-01-15
MISCELLANEOUS SHOPPING GOODS STORES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1998
REGISTRATION NO. 333-38597

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

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

AMENDMENT NO. 1
TO

FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------
PAWNMART, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 5940 75-2520896
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

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:

JAKES JORDAAN, ESQ. RICHARD F. DAHLSON, ESQ.
JORDAAN & PENNINGTON, PLLC JACKSON WALKER L.L.P.
300 CRESCENT COURT, SUITE 1670 901 MAIN STREET, SUITE 6000
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
(214) 871-6550 (214) 953-5896

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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. See next page.

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

================================================================================
(REGISTRATION STATEMENT COVER PAGE CONT'D)

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(1) AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $.01
PER SHARE(2) 1,380,000 $ 5.00 $ 6,900,000 $2,035.50
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK UNDERLYING
UNDERWRITER WARRANTS 120,000 $ 6.00 $ 720,000 $ 212.40
- --------------------------------------------------------------------------------------------------------------------------------
SERIES A REDEEMABLE COMMON
STOCK PURCHASE WARRANTS (3)
1,500,000 $ .125 (4) (4)
- --------------------------------------------------------------------------------------------------------------------------------
SERIES B REDEEMABLE COMMON
STOCK PURCHASE WARRANTS (3)
1,500,000 $.0625 (4) (4)
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, ISSUABLE
UNDER SERIES A REDEEMABLE
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK PURCHASE
WARRANTS (5) 1,500,000 $ 6.00 $ 9,000,000 $ 2,655.00
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, ISSUABLE UNDER
SERIES B REDEEMABLE COMMON
STOCK PURCHASE WARRANTS (6)
1,500,000 $ 8.00 $12,000,000 $ 3,540.00
- --------------------------------------------------------------------------------------------------------------------------------
UNDERWRITER WARRANTS 120,000 $ .001 $ 120 $ 0.04
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 8,442.94(7)
================================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.

(2) Includes 180,000 shares of Common Stock that may be purchased by the
Underwriter from the Company to cover over-allotments, if any.

(3) Includes 180,000 warrants that may be purchased by the Underwriter to cover
over-allotments, if any, and 120,000 warrants underlying the Underwriter
Warrants.

(4) Because the shares of Common Stock underlying the warrants are registered,
no additional registration fee required.

(5) Represents shares of Common Stock issuable upon exercise of the Series A
Redeemable Common Stock Purchase Warrants registered hereby together with
such additional indeterminate number of shares as may be issued upon
exercise of such Series A Redeemable Common Stock Purchase Warrants by
reason of the anti-dilution provisions contained therein.

(6) Represents shares of Common Stock issuable upon exercise of the Series B
Redeemable Common Stock Purchase Warrants registered hereby together with
such additional indeterminate number of shares as may be issued upon
exercise of such Series B Redeemable Common Stock Purchase Warrants by
reason of the anti-dilution provisions contained therein.

(7) Of this amount, $3,848.49 was previously paid.

================================================================================
<PAGE> 3

SUBJECT TO COMPLETION, DATED FEBRUARY , 1998
PAWNMART, INC.
1,200,000 SHARES OF COMMON STOCK
1,200,000 SERIES A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
1,200,000 SERIES B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
------------------------------------

PawnMart, Inc. (the "Company") is offering (the "Offering") 1,200,000
shares (the "Shares") of Common Stock, $.01 par value per share (the "Common
Stock"), 1,200,000 Series A Redeemable Common Stock Purchase Warrants (the
"Series A Warrants") and 1,200,000 Series B Redeemable Common Stock Purchase
Warrant (the "Series B Warrants"). The Shares, the Series A Warrants and the
Series B Warrants are sometimes hereinafter collectively referred to as the
"Securities." Prior to this Offering, there has been no public market for the
Securities. It is estimated that the initial public offering price will be $5.00
per Share, $0.125 per Series A Warrant and $0.0625 per Series B Warrant. Each
Series A Warrant and Series B Warrant (collectively, the "Warrants") entitles
the holder to purchase one share of Common Stock at a price of $6.00 per share
and $8.00 per share, respectively, during the respective five and six-year
periods commencing on the date of this Prospectus. The Series A Warrants and
Series B Warrants are redeemable by the Company for $.05 per warrant on not less
than 30 nor more than 60 days written notice if the closing price for the Common
Stock for seven trading days during a 10 consecutive trading day period ending
not more than 15 days prior to the date that the notice of redemption is mailed
equals or exceeds $9.00 per share and $11.00 per share, respectively. Any
redemption of the Warrants during the one-year period commencing on the date of
this Prospectus shall require the written consent of First London Securities
Corporation, the representative of the Underwriter (the "Representative"). See
"Description of Securities."

Prior to this Offering, there has been no public market for the Securities.
The initial public offering price of the Securities and the exercise price and
other terms of the Warrants have been determined through negotiations between
the Company and the Representative and are not related to the Company's assets,
book value, financial condition or other recognized criteria of value. Although
the Company has applied for the inclusion of the Common Stock and the Warrants
on the Pacific Stock Exchange under the proposed symbols "PMT", "PMTA" and
"PMTB," respectively, and on the Nasdaq SmallCap Market under the symbols
"PMRT", "PMRTA" and "PMRTB", respectively, there can be no assurance that an
active trading market in the Securities will develop or be sustained.

THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AS WELL AS
IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND
"DILUTION," COMMENCING ON PAGES 7 AND 15, RESPECTIVELY.

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>
<CAPTION>
==========================================================================================================================
PRICE TO Underwriting Proceeds to
PUBLIC Discounts and Company (2)
Commissions (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................................. $ $ $
- --------------------------------------------------------------------------------------------------------------------------
Per Series A Warrant................................... $ $ $
- --------------------------------------------------------------------------------------------------------------------------
Per Series B Warrant................................... $ $ $
- --------------------------------------------------------------------------------------------------------------------------
Total(3)............................................... $ $ $
==========================================================================================================================
</TABLE>

*See Footnotes on following Page

The Securities are offered by the Underwriter on a firm commitment basis,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter, and subject to their right to reject orders in whole or in part. It
is expected that delivery of the certificates for the shares of Common Stock and
Warrants will be made on or about , 1998.

FIRST LONDON SECURITIES CORPORATION
The date of this Prospectus is , 1998.

<PAGE> 4

Footnotes

(1) Does not include additional underwriting compensation to be received by the
Representative in the form of (i) a non-accountable expense allowance equal
to 3% of the gross proceeds of this Offering, of which $25,000 has been
paid to date, and (ii) warrants issued to the Representative (the
"Representative's Warrants") to purchase up to 120,000 of each of the
Securities, which Representative's Warrants are exercisable for a four-year
period commencing one year from the effective date of this Offering at a
purchase price of 120% of the initial offering price of the Securities. In
addition, the Company has granted to the Representative certain
registration rights with respect to registration of the shares of Common
Stock and the Warrants underlying the Representative's Warrants (the
"Underlying Warrants") and the shares of Common Stock issuable upon
exercise of the Underlying Warrants. The Company has agreed to pay the
Representative upon the exercise or redemption of the Warrants a fee equal
to 5% of the gross proceeds received by the Company from the exercise of
the Warrants and 5% of the aggregate redemption price for Warrants
redeemed. Such fee will be paid to the Representative or its designee no
sooner than 12 months after the effective date of this Offering. The
Company has agreed to indemnify the Underwriter against certain liabilities
arising under the Securities Act of 1933, as amended (the "Act"). See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated at $450,000,
including the Representative's non-accountable expense allowance.

(3) The Company has granted the Representative an option (the "Representative's
Over-Allotment Option"), exercisable within 30 days from the date of this
Prospectus, to purchase on the same terms as the Securities offered hereby
up to 180,000 additional Securities solely to cover over-allotments, if
any. If the Representative's Over-Allotment Option is exercised in full,
the total Price to Public, Underwriting Commissions, and Proceeds to
Company will be $ , $ and $ , respectively. See "Underwriting."

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement"), pursuant to the Act with respect to the Securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. THE STATEMENTS CONTAINED IN
THIS PROSPECTUS AS TO THE CONTENTS OF ANY CONTRACT OR OTHER DOCUMENT IDENTIFIED
AS EXHIBITS IN THIS PROSPECTUS ARE NOT NECESSARILY COMPLETE, AND IN EACH
INSTANCE, REFERENCE IS MADE TO A COPY OF SUCH CONTRACT OR DOCUMENT FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT, EACH STATEMENT BEING QUALIFIED IN ANY AND
ALL RESPECTS BY SUCH REFERENCE. For further information with respect to the
Company and the Securities offered hereby, reference is made to the Registration
Statement and exhibits which may be inspected without charge at the Commission's
principal office at Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549.

Upon consummation of this Offering, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, (the "Exchange
Act") and in accordance therewith will file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its New
York Regional Office, Room 1300, 7 World Trade Center, New York, New York 10048;
and at its Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may
also be obtained from the Public Reference Section of the Commission at
prescribed rates. The Company's Registration Statement on Form SB-2 as well as
any reports to be filed under the Exchange Act can also be obtained
electronically after the Company has filed such documents with the Commission
through a variety of databases, including among others, the Commission's
Electronic Data Gathering, Analysis And Retrieval ("EDGAR") program,
Knight-Ridder Information, Inc., Federal Filings/Dow Jones and Lexis/Nexis.
Additionally, the Commission maintains a Website (at http://www.sec.gov) that
contains such information regarding the Company.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other reports as the Company
deems appropriate or as may be required by law. Such requests may be directed to
Carson R. Thompson, Chairman of the Board, PawnMart, Inc., 301 Commerce Street,
Suite 3600, Fort Worth, Texas 76102, telephone number (817) 335-7296.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OR
THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SEE
"PLAN OF DISTRIBUTION."

<PAGE> 5
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 Common Stock of $5.00 per share; (ii) assumes no exercise of
the Warrants or Underwriter's over-allotment option; (iii) gives effect to the
Preferred Stock Conversion (as defined below) and the Debenture Conversion (as
defined below); (iv) gives effect to a 1-for-2 and a subsequent 1-for-1.5163715
reverse stock split (collectively, the "Reverse Stock Split") of the Company's
outstanding shares of Common Stock; and (v) 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 generates income in two
ways: through collection of a monthly service charge from advancing money to
individuals based primarily upon the estimated resale value of pledged personal
property such as jewelry, consumer electronics, tools, musical instruments,
firearms, automobiles, and other miscellaneous items and through a profit
realized on the retail sale of unredeemed or other purchased pre-owned
merchandise.

MARKET POSITIONING STRATEGY

The Company has developed extensive demographical information that
identifies both its borrowing and retail customers. This data indicates that the
Company's customers have a median household income in the $45,000 to $55,000
range, more than 50 percent are female and approximately half are married with
children. In this regard, the Company's strategic market positioning targets
these customer groups for both pawn and retail transactions with specialty
retail concepts such as "PAWNMART(sm) -- An Estate Sale Everyday(sm)." To
attract these customers, PAWNMART(sm) stores are attractive, clean, well-lit and
often located close to national discount stores, with merchandise displayed in
an organized and easy-to- shop manner similar to national discount stores.
Because the Company believes that most existing pawnshops are situated in
locations that do not satisfy the Company's customer demographics, the Company
has opened new stores rather than acquire smaller "mom and pop" stores.
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.

FINANCIAL RESTRUCTURING

The Company's capital structure will automatically change upon consummation
of the Offering, resulting in an approximate $1,654,000 decrease in the
Company's annual cash interest requirements and an approximate $130,000 decrease
in the Company's annual dividend requirements. The Company's total stockholders'
equity (deficit) at October 26, 1997 will improve by $14,146,107 from a total
deficit of ($5,476,043) on an actual basis to total equity of $3,495,064 on a
pro forma and $8,670,064 on an adjusted basis. See "Capitalization."

In particular, the Company's $.50 Series A Convertible Preferred Stock (the
"Series A Preferred Stock"), Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), Series C Convertible Preferred Stock (the "Series C Preferred
Stock"), and 12% Series D Convertible Exchangeable Preferred Stock (the "Series
D Preferred Stock") will be converted automatically into an aggregate of
1,482,766 shares of Common Stock at an average conversion price of $2.90 per
share of Common Stock (the "Preferred Stock Conversion") and $9,520,000
aggregate principal amount of the Company's 14% Convertible Subordinated
Debentures due June 30, 1999, June 30, 2000 and January 31, 2001, respectively,
(collectively, the "Subordinated Debentures") will be converted automatically
into an aggregate of 2,380,000 shares of Common Stock at a conversion price of
$4.00 in principal amount per share of Common Stock (the "Debenture
Conversion"). Additionally, the Company intends to use approximately 41.4% of
the net proceeds from the Offering for the repayment of $2,142,000 in 15% notes
payable. See "Use of Proceeds."

3
<PAGE> 6

FRAGMENTED AND GROWING INDUSTRY

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
new PAWNMART(sm) stores.

GROWTH STRATEGY

The Company has adopted the following strategy:

o Develop new -- rather than acquire existing -- stores that satisfy the
Company's strategic market positioning similar to national discount stores;

o Expand in metropolitan areas in states with favorable pawn regulations;

o Franchise operations in smaller markets;

o Utilize information technology as a platform for collateral assessment and
management control; and

o Direct customer marketing.

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.

THE COMPANY

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(sm)." 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. As of December 1, 1997, the Company has a total of 115
employees.

4
<PAGE> 7

THE OFFERING

<S> <C>
Securities Offered by the Company:
Common Stock..............................................1,200,000 shares
Series A Warrants.........................................1,200,000 warrants
Series B Warrants.........................................1,200,000 warrants

Common Stock Outstanding:
Prior to the Offering.....................................5,800,000 shares (1)
After the Offering........................................7,000,000 shares (1)

Estimated Net Proceeds........................................$5.175 million (2)

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

Proposed Trading Symbols (3):
Pacific Stock Exchange:
Common Stock............................................PMT
Series A Warrants......................................PMTA
Series B Warrants......................................PMTB
Nasdaq SmallCap Market:
Common Stock...........................................PMRT
Series A Warrants......................................PMRTA
Series B Warrants......................................PMRTB

Risk Factors..................................................The Common Stock and the Warrants offered hereby are
speculative and involve a high degree of risk. Investors
should carefully consider the risk factors enumerated
hereafter before investing in the Common Stock and the
Warrants. See "Risk Factors" and "Dilution."
</TABLE>

(1) See "Capitalization."

(2) After subtracting the underwriting discounts and commissions and estimated
offering expenses payable by the Company, including a 3% non-accountable
expense allowance to the Representative.

(3) Pacific Stock Exchange and the Nasdaq SmallCap Market symbols do not imply
that an established public trading market will develop for any of these
securities, or if developed, that any such market will be sustained. See
"Risk Factors--Possible Applicability of Rules Relating to Low-Priced
Stock; Possible Failure to Qualify for Pacific Stock Exchange or Nasdaq
SmallCap Market Listing."

5
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
Year Ended Nine Months Ended
------------------------------ ----------------------------
SELECTED STATEMENTS OF OPERATIONS DATA: January 28, January 26, October 27, October 26,
1996 1997 1996 1997
---- ---- ---- ----
(Unaudited) (Unaudited)

<S> <C> <C> <C> <C>
REVENUES:
Pawn service charges............................. $1,337,618 $2,291,104 $ 1,622,310 $ 2,106,525
Merchandise sales................................ 3,051,678 5,522,731 3,887,577 4,981,240
Other income..................................... 34,206 89,567 8,050 67,320
----------- ----------- ----------- -----------
Total revenue.................................... 4,423,502 7,903,402 5,517,937 7,155,085
Less cost of sales............................... (1,941,489) (3,527,670) (2,540,902) (3,458,769)
----------- ----------- ----------- -----------
Gross profit..................................... 2,482,013 4,375,732 2,977,035 3,696,316

EXPENSES:
Operating expenses............................... 2,625,716 3,863,843 2,553,588 2,788,950
Interest......................................... 720,301 1,360,511 947,015 1,355,951
Depreciation and amortization.................... 375,023 495,125 389,554 377,094
Administrative................................... 1,588,600 1,712,568 1,343,400 1,518,913
----------- ----------- ----------- -----------
Total expenses................................... 5,309,640 7,432,047 5,233,557 6,040,908
----------- ----------- ----------- -----------
Net loss......................................... $(2,827,627) $(3,056,315) $(2,256,522) $(2,344,592)
=========== =========== =========== ===========
Pro forma loss per common share (1).............. $ (0.34) $ (0.19)
=========== ===========
Pro forma common and common equivalent
shares outstanding (1)........................... 6,145,847 6,398,644
OTHER DATA:
Stores owned at end of period.................... 17 19 19 19
Average age of stores at end of period........... .93 years 1.77 years 1.52 years 2.52 years
</TABLE>

<TABLE>
<CAPTION>
At October 26, 1997
--------------------------------------------------------------
SELECTED BALANCE SHEET DATA: Actual Pro Forma (2) As Adjusted (3)
------ ------------- ---------------

<S> <C> <C> <C>
Loans................................. $ 2,426,158 $ 2,426,158 $ 2,426,158
Inventories, net...................... 2,227,782 2,227,782 2,227,782
Working capital....................... 3,045,668 3,045,668 6,830,668
Total assets.......................... 7,036,763 6,487,870 9,520,870
Long-term notes payable,
net of current installments....... 10,272,000 752,000 --
Stockholders' equity (deficit) (4).... (5,476,043) 3,495,064 8,670,064
</TABLE>

- ----------

(1) 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.

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

(3) Pro forma as adjusted to give effect to the sale of (i) the Securities,
(ii) the application of the net proceeds therefrom of approximately $5.175
million and (iii) the retirement of $2,142,000 in debt of which $1,390,000
was current at October 26, 1997. See "Use of Proceeds" and
"Capitalization."

(4) See "Capitalization."

6
<PAGE> 9

RISK FACTORS

AN INVESTMENT IN THE SECURITIES 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 October 26, 1997, the
Company has experienced aggregate losses of $9,882,688. Further, a key element
of the Company's strategy consists of developing (rather than acquiring)
multiple PAWNMART(sm) 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."

CAPITAL REQUIREMENTS

The Company is dependent upon the proceeds of this Offering and the
anticipated cash flow from operations to complete its current expansion plans.
Should the Company's cash flow from operations fail to meet anticipated levels,
or should its costs and capital expenditures exceed the amounts currently
expected to be required, the Company could be required to seek unanticipated
financing in the future. There can be no assurance that the Company will be able
to raise such capital or financing when needed or on acceptable terms, and
therefore, the Company may be unable to achieve its goals, including anticipated
growth. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Business --
Growth Strategy."

MANAGEMENT OF GROWTH

The Company plans to expand its business through a roll-out of new
PAWNMART(sm) 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.

7
<PAGE> 10

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.

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.

RISKS RELATED TO IMPROPER ASSESSMENT OF THE PLEDGED PROPERTY'S ESTIMATED
RESALE VALUE

The Company makes pawn loans without the borrower's personal liability and
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. In this regard, 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. Although, historically, the Company
has experienced profits from the sale of such merchandise, no assurances can be
given that the Company's historical results will continue. 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 amount advanced on the acquired
collateral.

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
Company does not have an employment agreement with any member of its executive
staff. 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."

8
<PAGE> 11

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 nine months ended October 26, 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.

NO TRADEMARK PROTECTION

The Company has not been issued any registered trademark for its
"PAWNMART(sm) " 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 5,800,000 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."

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 on its Common Stock in
the foreseeable future. See "Dividend Policy."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF SECURITIES PRICES

Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Although the Company has applied to list the Common Stock
and the Warrants on the Pacific Stock Exchange and the Nasdaq SmallCap Market,
there can be no assurance that a regular trading market will develop (or be
sustained, if developed) for the Common Stock or the Warrants upon completion of
this Offering, or that purchasers will be able to resell their Common Stock or
Warrants or otherwise liquidate their investment without considerable delay, if
at all. Recent history relating to the market prices of newly public companies
indicates that, from time to time, there may be significant volatility in their
market price. There can be no assurance that the market price of the Common
Stock or the Warrants will not be volatile as a result of a number of factors,
including the Company's financial results or various matters affecting the stock
market generally.

ARBITRARY OFFERING PRICE AND EXERCISE PRICE OF WARRANTS

The public offering price of the Common Stock and the Warrants and the
exercise price of the Warrants, as well as the exercise price of the
Representative's Warrants, have been determined solely by negotiations between
the Company and the Representative. Among the factors considered in determining
these prices were the Company's current financial condition and prospects,
market prices of similar securities of comparable publicly traded companies, and
the general condition of the

9
<PAGE> 12

securities market. However, the public offering price of the Common Stock and
the Warrants and the exercise price of the Warrants and the Representative's
Warrants do not necessarily bear any relationship to the Company's assets, book
value, earnings or any other established criterion of value. See"Underwriting."

NECESSITY TO MAINTAIN CURRENT PROSPECTUS AND REGISTRATION STATEMENT

The Company must maintain an effective registration statement on file with
the Commission before any of the Warrants may be redeemed or exercised. It is
possible that the Company may be unable to cause a registration statement
covering the Common Stock underlying the Warrants to be effective. It is also
possible that the Warrants could be acquired by persons residing in states where
the Company is unable to qualify the Common Stock underlying the Warrants for
sale. In either event, the Warrants may expire, unexercised, which would result
in the holders losing all the value of the Warrants.

STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE WARRANTS

Holders of the Warrants have the right to exercise the Warrants only if the
underlying shares of Common Stock are qualified, registered or exempt from
registration under applicable securities laws of the states in which the various
holders of the Warrants reside. The Company cannot issue shares of Common Stock
to holders of the Warrants in states where such shares are not qualified,
registered or exempt. The Company has undertaken, however, to qualify the
Warrants for listing on the Pacific Stock Exchange which provides for blue sky
registration in over 20 states. See "Description of Capital Stock--Series A
Warrants and Series B Warrants."

REDEEMABLE WARRANTS AND IMPACT ON INVESTORS

The Warrants are subject to redemption by the Company in certain
circumstances. The Company's exercise of this right would force a holder of the
Warrants to exercise the Warrants and pay the exercise price at a time when it
may be disadvantageous for the holder to do so, to sell the Warrants at the then
current market price when the holder might otherwise wish to hold the Warrants
for possible additional appreciation, or to accept the redemption price, which
is likely to be substantially less than the market value of the Warrants in the
event of a call for redemption. Holders who do not exercise their Warrants prior
to redemption by the Company will forfeit their right to purchase the shares of
Common Stock underlying the Warrants. The foregoing notwithstanding, the Company
may not redeem the Warrants at any time that a current registration statement
under the Act is not then in effect. See "Description of Capital Stock--Series A
Warrants and Series B Warrants."

REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE MARKET

It is anticipated that a significant amount of the Common Stock and the
Warrants will be sold to customers of the Representative. Although the
Representative have advised the Company that they intend to make a market in the
Common Stock and the Warrants, they will have no legal obligation to do so. The
prices and the liquidity of the Common Stock and the Warrants may be
significantly affected by the degree, if any, of the Representative's
participation in the market. No assurance can be given that any market making
activities of the Representative, if commenced, will be continued. See
"Underwriting."

POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED OR "PENNY" STOCKS;
POSSIBLE FAILURE TO QUALIFY FOR PACIFIC STOCK EXCHANGE OR NASDAQ SMALLCAP MARKET
LISTING

The Commission has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price (as defined) of less
than $5.00 per share, subject to certain exceptions. While the price at which
the shares of Common Stock offered to the public pursuant to this Offering will
be equal to $5.00, the Warrants offered hereby will initially be "penny stocks"
and become subject to rules that impose additional sales practice requirements
on broker/dealers who sell such securities to persons other than established
customers and accredited investors, unless the Common Stock and the Warrants are
listed on the Pacific Stock Exchange. There can be no assurance that the Company
will be able to satisfy the listing criteria of the Pacific Stock Exchange or
that the Common Stock or the Warrants will trade for $5.00 or more per security
after the

10
<PAGE> 13

Offering. Consequently, the "penny stock" rules may restrict the ability of
broker/dealers to sell the Company's securities and may affect the ability of
purchasers in this Offering to sell the Company's securities in a secondary
market.

Although the Company has applied for listing of the Common Stock and the
Warrants on the Pacific Stock Exchange and the Nasdaq SmallCap Market, there can
be no assurance that such application will be approved or that a trading market
for the Common Stock and the Warrants will develop or, if developed, will be
sustained. Furthermore, there can be no assurance that the securities purchased
by the public hereunder may be resold at their original offering price or at any
other price. If the Common Stock and the Warrants are not approved for listing
on the Pacific Stock Exchange or the Nasdaq SmallCap Market, the Company intends
to apply for listing of the Common Stock and the Warrants on the Boston Stock
Exchange; however, there can be no assurance that such application would be
accepted.

In order to qualify for initial listing on the Pacific Stock Exchange, a
company must, among other things, have at least $8,000,000 in net worth, $2.0
million "public float," and a minimum bid price for its securities of $1.00 per
share. For continued listing on the Pacific Stock Exchange, a company must
maintain a $1.0 million market value of the public float and $2.0 million in
total capital and surplus. In addition, continued inclusion requires two
market-makers and a minimum bid of $1.00 per share. The failure to meet these
maintenance criteria in the future may result in the discontinuance of the
listing of the Common Stock and Warrants on the Pacific Stock Exchange.

In order to qualify for initial listing on the Nasdaq SmallCap Market, a
company must, among other things, have at least $4,000,000 in total assets, $2.0
million of total capital and surplus, $1.0 million "public float," and a minimum
bid price for its securities of $3.00 per share. For continued listing on the
Nasdaq SmallCap Market, a company must maintain a $200,000 market value of the
public float, $2.0 million in total assets and $1.0 million in total capital and
surplus. In addition, continued inclusion requires two market- makers and a
minimum bid of $1.00 per share. The failure to meet these maintenance criteria
in the future may result in the discontinuance of the listing of the Common
Stock and Warrants on the Nasdaq SmallCap Market.

If the Company is or becomes unable to meet the listing criteria (either
initially or on a continued basis) of the Pacific Stock Exchange or the Nasdaq
SmallCap Market and is never traded or becomes delisted therefrom, trading, if
any, in the Common Stock and the Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
"Electronic Bulletin Board" administered by the National Association of
Securities Dealers, Inc. (the "NASD"). In such an event, the market price of the
Common Stock and the Warrants may be adversely impacted. As a result, an
investor may find it difficult to dispose of or to obtain accurate quotations as
to the market value of the Common Stock and the Warrants.

EXERCISE OF REPRESENTATIVE'S PURCHASE WARRANTS

In connection with this Offering, the Company will sell to the
Representative or its designee, for nominal consideration, the Representative's
Warrants to purchase up to 120,000 shares of Common Stock, 120,000 Series A
Warrants and 120,000 Series B Warrants. The Representative's Warrants will be
exercisable for a four-year period commencing one year from the effective date
of this Offering at an exercise price of 120% of the price at which the Common
Stock and Warrants are sold to the public, subject to adjustment. The
Representative's Warrants may have certain dilutive effects because the holders
thereof will be given the opportunity to profit from a rise in the market price
of the underlying shares with a resulting dilution in the interest of the
Company's other stockholders. The terms on which the Company could obtain
additional capital during the life of the Representative's Warrants may be
adversely affected because the holders of the Representative's Warrants might be
expected to exercise them at a time when the Company would otherwise be able to
obtain comparable additional capital in a new offering of securities at a price
per share greater than the exercise price of the Representative's Warrants.

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

11
<PAGE> 14

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 $3.77 (75.4%) 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 213,455 shares of Common Stock at an exercise price of $5.50
per share and outstanding options to purchase a total of 308,764 shares of
Common Stock at an exercise price of $3.79 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 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.

FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Act, and Section 21E of the Exchange Act. The actual results
of the Company may differ significantly from the results discussed in such
forward-looking statements. Certain factors that might cause such differences
include, but are not limited to, the factors discussed in this "Risk Factors"
section. The safe harbors contained in Section 27A of the Act and Section 21E of
the Act, which apply to certain forward-looking statements, are not applicable
to this Offering.

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<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Securities offered by
the Company are estimated to be approximately $5.175 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>
Dollar Percent of
Amount Net Proceeds

<S> <C> <C>
Capital expenditures for new store development .................. $2,825,000 54.6%
Repayment of indebtedness (1) ................................... 2,142,000 41.4%
Working capital and other general corporate purposes ............ 208,000 4.0%
---------- -----
Total uses ................................................... $5,175,000 100.0%
========== =====
</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 together with the proceeds from anticipated commercial credit
facilities will be sufficient to fund such expenditures and other cash
requirements for the next 12 months. However, if the Company fails to obtain
such credit facilities, the Company may be required to delay the development of
new stores. Over the longer term, it is likely that the Company will require
additional capital to fund its anticipated growth. The Company has no present
plans, proposals, arrangements, commitments, agreements or understandings with
respect to any acquisitions. However, 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

During the nine months ended October 26, 1997, the Company paid $33,059 in
dividends on its Series D Preferred Stock. The annual dividend requirements
related to the Company's Series D Preferred Stock total approximately $130,000.
The Company has not paid any cash dividends on its other classes of outstanding
common and preferred stock 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 on its other classes of outstanding common and
preferred stock 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."

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<PAGE> 16

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company, (i) on an actual basis after giving effect to the Reverse Stock Split;
(ii) on a pro forma basis after giving effect to the Preferred Stock Conversion
and the Debenture Conversion; and (iii) on an as adjusted basis to additionally
reflect the issuance of the Securities 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 October 26, 1997
---------------------------------------
Actual Pro Forma As Adjusted (1)
------ --------- ---------------
(in thousands)
<S> <C> <C> <C>
Long-term notes payable, net of current installments (2) ................... $ 10,272 $ 752 $ --
-------- -------- --------

Stockholders' equity (deficit):
Preferred stock, $.01 par value; authorized 10,000,000 shares:
Series A Preferred Stock; 2,000,000 shares issued and
outstanding (liquidation preference of $.50 per
share) (3) ..................................................... 20 -- --
Series B Preferred Stock; 1,091,858 issued
(liquidation preference of $2.00 per share) (3) ................ 11 -- --
Series C Convertible Preferred stock; 26,842 shares issued
and outstanding (liquidation preference of $2.50 per
share) (3) ..................................................... 1 -- --
Series D Preferred Stock; 542,500 shares issued
and outstanding (liquidation preference of $2.00 per
share) (3) ..................................................... 5 -- --
Common stock, $.01 par value; authorized 20,000,000
shares; 1,950,424 shares issued (actual), 5,821,432 shares
issued (pro forma), and 7,021,432 shares issued (as adjusted)
(2)(3)(4) ............................................................ 20 58 70
Series A Redeemable Common Stock Purchase Warrants ....................... -- -- 150
Series B Redeemable Common Stock Purchase Warrants ....................... -- -- 75
Additional paid-in capital (2)(3)(4) ..................................... 4,453 16,626 21,564
Accumulated deficit ...................................................... (9,916) (13,119) (13,119)
Less treasury stock, at cost: 13,189 common shares and 25,000
Series B Convertible Preferred shares (actual) and 21,432
common shares (pro forma and as adjusted) ............................... (70) (70) (70)
-------- -------- --------
Total stockholders' equity (deficit) ....................................... (5,476) 3,495 8,670
-------- -------- --------
Total capitalization .................................................... $ 4,796 $ 4,247 $ 8,670
======== ======== ========
</TABLE>

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

(1) Does not include: (i) 213,455 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) 120,000 shares of Common Stock, 120,000
Series A Warrants and 120,000 Series B Warrants issuable upon exercise of
the Representative's Warrants; (iii) 308,764 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; and (iv)
2,400,000 shares of Common Stock which may be issued upon exercise of the
Warrants.

(2) Pro forma common shares outstanding includes 2,380,000 shares issued in
connection with the Debenture Conversion. See "Prospectus Summary -
Financial Restructuring" and Notes 5, 11 and 12 of Notes to Audited
Consolidated Financial Statements.

14
<PAGE> 17

(3) Pro forma common shares outstanding includes 1,482,766 shares issued in
connection with the Preferred Stock Conversion. See "Prospectus Summary -
Financial Restructuring" and Notes 8, 11 and 12 of Notes to Audited
Consolidated Financial Statements.

(4) As adjusted common shares outstanding includes the issuance of 1,200,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $5.00 per share.

DILUTION

The pro forma net tangible book value of the Company at October 26, 1997
was $3,417,272, or $0.59 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 the Securities, the pro
forma net tangible book value of the Company at October 26, 1997 would have been
$8,592,272, or $1.23 per share, representing an immediate increase in net
tangible book value of $.64 per share to existing stockholders and an immediate
dilution of $3.77 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>
<S> <C> <C>
Assumed initial public offering price per share.................................. $ 5.00
Pro forma net tangible book value per share................................... $0.59
Increase per share attributable to New Investors.............................. $0.64
Pro forma net tangible book value after the Offering............................. 1.23
-------
Dilution of net tangible book value to New Investors............................. $ 3.77
=======
Percentage dilution................................................................ 75.4%
=======
</TABLE>

The following table summarizes as of the date of this Prospectus 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>
Average
Shares Purchased Total Consideration Price Per
Number Percent Amount Percent Share
------------------ -------------------- ---------

<S> <C> <C> <C> <C> <C>
Existing Stockholders ............................... 5,800,000 82.9% $13,762,134 69.6% $ 2.37
New Investors ....................................... 1,200,000 17.1% 6,000,000 30.4% $ 5.00
--------- ----- ----------- -----
Total .......................................... 7,000,000 100.0% $19,762,134 100.0%
========= ===== =========== =====
</TABLE>

The computations in both of the foregoing tables assume no exercise of
outstanding employee stock options and warrants, the Warrants, or of the
Underwriter's over-allotment option. See "Underwriting." As of the date of this
Prospectus, options to purchase 308,764 shares of Common Stock at an exercise
price of $3.79 per share were outstanding. See "Management -- Employee Stock
Option Plan." In addition, warrants to purchase 213,455 shares of Common Stock
at an exercise price of $5.50 per share had been granted.

15
<PAGE> 18

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.

<TABLE>
<CAPTION>
Year Ended Nine Months
--------------------------- -----------------------------
SELECTED STATEMENTS OF OPERATIONS DATA: January 28, January 26, October 27, October 26,
1996 1997 1996 1997
---- ---- ---- ----
(Unaudited) (Unaudited)

<S> <C> <C> <C> <C>
REVENUES:
Pawn service charges ........................ $ 1,337,618 $ 2,291,104 $ 1,622,310 $ 2,106,525
Merchandise sales ........................... 3,051,678 5,522,731 3,887,577 4,981,240
Other income ................................ 34,206 89,567 8,050 67,320
----------- ----------- ----------- -----------
Total revenue ............................... 4,423,502 7,903,402 5,517,937 7,155,085
Less cost of sales .......................... (1,941,489) (3,527,670) (2,540,902) (3,458,769)
----------- ----------- ----------- -----------
Gross profit ................................ 2,482,013 4,375,732 2,977,035 3,696,316
EXPENSES:
Operating expenses .......................... 2,625,716 3,863,843 2,553,588 2,788,950
Interest .................................... 720,301 1,360,511 947,015 1,355,951
Depreciation and amortization ............... 375,023 495,125 389,554 377,094
Administrative .............................. 1,588,600 1,712,568 1,343,400 1,518,913
----------- ----------- ----------- -----------
Total expenses .............................. 5,309,640 7,432,047 5,233,557 6,040,908
----------- ----------- ----------- -----------
Net loss .................................... $(2,827,627) $(3,056,315) $(2,256,522) $(2,344,592)
=========== =========== =========== ===========
Pro forma loss per common share (1) ......... $ (0.34) $ (0.19)
=========== ===========
Pro forma common and common
equivalent shares outstanding (1) ........... 6,145,847 6,398,644
OTHER DATA:
Stores owned at end of period ............... 17 19 19 19
Average age of stores at end of period ...... .93 years 1.77 years 1.52 years 2.52 years
</TABLE>

<TABLE>
<CAPTION>
At October 26, 1997
-------------------------------------------------------------
SELECTED BALANCE SHEET DATA: Actual Pro Forma (2) As Adjusted (3)
------ -------------- ---------------

- --------

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

(3) Pro forma as adjusted to give effect to the sale of (i) the Securities;
(ii) the application of the net proceeds therefrom of approximately $5.175
million and (iii) the retirement of $2,142,000 in debt of which $1,390,000
was current at October 26, 1997. See "Use of Proceeds" and
"Capitalization."

(4) See "Capitalization."

16
<PAGE> 19

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 October 26, 1997 (six
stores) indicate average gross profit during the first three years of operations
of approximately $190,000, $314,000, and $327,000, 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 $3,000, $107,000, and $124,000, respectively. As of
October 26, 1997, seven 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(sm) 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 projects the following initial capital expenditures and
costs associated with opening a new PAWNMART(sm) 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,

17
<PAGE> 20

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 nine
months ended October 27, 1996 and October 26, 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. Year Ended Nine Months Ended

<TABLE>
<CAPTION>
January 28, January 26, October 27, October 26,
1996 1997 1996 1997

<S> <C> <C> <C> <C>
Pawn Service Charges....................................... 30.2% 29.0% 29.4% 29.4%
Merchandise Sales.......................................... 69.0 69.9 70.5 69.6
Other Income............................................... 0.8 1.1 0.1 1.0
----- ----- ----- -----
Total Revenue ............................................. 100.0 100.0 100.0 100.0
Cost of Sales ............................................. 43.9 44.6 46.0 48.3
----- ----- ----- -----
Gross Profit .............................................. 56.1 55.4 54.0 51.7
Operating Expenses ........................................ 59.3 48.9 46.3 39.0
----- ----- ----- -----
Store Contribution ........................................ (3.2) 6.5 7.7 12.7
Administrative Expenses ................................... 35.9 21.7 24.3 21.2
Interest .................................................. 16.3 17.2 17.2 19.0
Depreciation and Amortization ............................. 8.5 6.3 7.1 5.3
----- ----- ----- -----
Net Loss .................................................. (63.9)% (38.7)% (40.9)% (32.8)%
===== ===== ===== =====
</TABLE>

RESULTS OF OPERATIONS

NINE MONTHS ENDED OCTOBER 26, 1997 COMPARED TO NINE MONTHS ENDED OCTOBER 27,
1996

Total revenues increased 30% to $7,155,085 for the nine months ended
October 26, 1997 (the "Nine Month 1997 Period") as compared to $5,517,937 for
the nine months ended October 27, 1996 (the "Nine Month 1996 Period").
$1,258,905 of this increase was due to a 24% increase in comparative store
revenue for stores opened 12 months or more ("Comparative Stores") and $378,243
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 28% increase in product sales and a 30% increase in pawn service charges.

Merchandise sales increased 28% to $4,981,240 for the Nine Month 1997
Period from $3,887,577 for the Nine Month 1996 Period. $821,009 of this increase
was due to a 22% increase in sales gains for Comparative Stores and $272,654
from two stores opened after Fiscal 1995.

Pawn service charges increased 30% to $2,106,525 in the Nine Month 1997
Period from $1,622,310 in the Nine Month 1996 Period primarily due to pawn loans
increasing 12% from $2,167,538 at October 27, 1996 to $2,426,158 at October 26,
1997. $369,180 of this increase was due to a 24% increase in pawn service charge
gains for Comparative Stores and $115,035 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.

18
<PAGE> 21

Gross profit as a percentage of total revenues declined 2.3% from 54.0% in
the Nine Month 1996 Period to 51.7% in the Nine Month 1997 Period primarily due
to a conscious effort by the Company to turn older inventory and an uninsured
theft at one of the Company's locations during February 1997. The Company
currently maintains theft insurance at all locations.

Operating expenses increased 9% to $2,788,950 in the Nine Month 1997 Period
from $2,553,588 in the Nine 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 39% in the Nine Month 1997 Period from 46% in the Nine
Month 1996 Period primarily resulting from the large increases in comparable
store sales and pawn service charges discussed above.

Interest expense increased 43% to $1,355,951 in the Nine Month 1997 Period
from $947,015 in the Nine Month 1996 Period primarily due to increases in the
aggregate outstanding principal amount of Subordinated Debentures.

Administrative expenses increased 13% to $1,518,913 in the Nine Month 1997
Period from $1,343,400 in the Nine 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 21% of total revenues in the Nine Month
1997 Period compared to 24% in the Nine Month 1996 Period primarily resulting
from significant increases in comparable store sales and pawn service charges
discussed above.

Store contribution margin increased 114% to $907,366 in the Nine Month 1997
Period compared to $423,447 for the Nine 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 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 81% 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 sales gains for Comparative Stores and $1,960,212 from 12 stores
opened after Fiscal 1994.

Pawn service charges increased 71% 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 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 higher
percentage of loans being renewed causing pawn service charges to increase as a
percentage of loans outstanding.

Operating expenses increased 47% 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 89% to $1,360,511 during Fiscal 1996 from
$720,301 during Fiscal 1995 primarily due to increases in the aggregate
outstanding principal amount of Subordinated Debentures.

Administrative expenses increased 8% 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.

19
<PAGE> 22

Store contribution margin increased 256% 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 October 26, 1997, the Company operated 19 stores.
The Company funded these operations from proceeds attributable to debt and
equity issuances. At October 26, 1997, the Company's primary sources of
liquidity were $166,776 in cash and cash equivalents, $250,606 in pawn service
charges receivable, $2,426,158 in loans, and $2,227,782 in inventories. The
Company had a current ratio of approximately 1.9 to 1.0 and 2.4 to 1.0 at
January 26, 1997 and October 26, 1997, respectively. Net cash used in operating
activities was $2,356,914 in Fiscal 1996, $3,354,770 in Fiscal 1995, $2,852,487
in the Nine Month 1997 Period and $1,896,488 in the Nine Month 1996 Period.

Since its inception in January 1994, the Company has invested in the
management and financial controls 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."

The Company's newly established stores generate substantially higher levels
of profitability after reaching two years of age. As of October 26, 1997 seven
of the Company's 19 stores were under two years of age. Presently, 18 of the
Company's 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.

CAPITAL REQUIREMENTS

20
<PAGE> 23

BUSINESS

INDUSTRY

The pawnshop industry is a multi-billion dollar, rapidly growing industry
with an increasing number of states adopting favorable pawnshop regulations.
States with favorable pawn regulations include, but are not limited to, Alabama,
Florida, Georgia, Indiana, Kentucky, Illinois, Mississippi, Missouri, North
Carolina, Oklahoma, South Carolina, Tennessee and Texas. 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.

During the fiscal years ended January 26, 1997 and January 28, 1996, the
Company's promotional and advertising strategies primarily consisted of
newspaper ads and store promotional signs. During recent months, the Company has
developed a targeted database marketing segmentation system and has utilized
such information to begin a direct mailing campaign targeting specific customer
profiles. The Company has incurred approximately $25,000 in research and
development costs to implement the targeted database marketing segmentation
system.

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 -- 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 generates income in two
ways: through collection of a monthly service charge from advancing money to
individuals based primarily upon the estimated resale value of pledged personal
property such as jewelry, consumer electronics, tools, musical instruments,
firearms, automobiles and other miscellaneous items and through a profit
realized on the retail sale of the unredeemed or other purchased pre-owned
merchandise.

STRATEGIC MARKET POSITIONING

The Company has developed extensive demographical information that
identifies both its borrowing and retail customers. This data indicates that the
Company's customers have a median household income in the $45,000 to $55,000
range, more than 50 percent are female and approximately half are married with
children. In this regard, the Company's strategic market positioning targets
these customer groups for both pawn and retail transactions with specialty
retail concepts such as "PAWNMART(sm) -- An Estate Sale Everyday(sm)." To
attract these customers, all PAWNMART(sm) stores are attractive, clean, well-lit
and often located close to national discount stores, with merchandise displayed
in an organized and easy-to-shop manner similar to national discount stores.
Because the Company believes that most existing pawnshops are situated in
locations that do not satisfy the Company's customer demographics, the Company
has opened new stores rather than acquire smaller "mom and pop" stores.
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.

21
<PAGE> 24

GROWTH STRATEGY

o DEVELOP NEW -- RATHER THAN ACQUIRE -- STORES THAT MEET SITE SELECTION,
STORE SIZE AND CONFIGURATION REQUIREMENTS IN SELECTED MARKETS. The Company
believes that by opening new stores -- rather than acquiring smaller "mom
and pop" stores -- it will enjoy substantial long-term strategic benefits.
First, the Company believes that ideal site selection is one of the most
critical factors in creating a successful PAWNMART(sm) store. In this
regard, the Company has developed extensive customer demographics that
identify both its borrowing and retail customers. The Company believes that
most existing pawnshops are situated in less than ideal locations. The
Company, therefore, believes that by opening new stores only in locations
meeting its demographic and site selection requirements, it will be well
situated to compete effectively in the highly fragmented pawnshop industry.
Second, the Company believes that the "look and feel" of its stores is an
important factor in establishing a successful specialty retail store and
that most existing pawnshops do not meet, and cannot cost-effectively be
modified to meet, the Company's store size and configuration requirements.
By opening new stores only in accordance with its specifications, the
Company can ensure that each PAWNMART(sm) has a similar "look and feel."
During the next fiscal year, the Company anticipates opening between 15 and
20 stores.

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

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

o EXPAND IN METROPOLITAN AREAS IN STATES WITH FAVORABLE PAWN REGULATIONS. The
Company's roll-out strategy is to generate operating efficiencies by first
expanding in the metropolitan areas of Atlanta, Georgia, Mobile, Alabama
and Charlotte, North Carolina, and thereafter, in metropolitan areas in
states with favorable pawn regulations.

o FRANCHISE OPERATIONS IN SMALLER MARKETS. The Company intends to sell
PAWNMART(sm) franchises in secondary markets. The Company's franchise
strategy is designed to allow future franchisees to benefit from the
Company's targeted database marketing segmentation system, PAWNLINK(TM)
computer software and information system, as well as the Company's
standardized operating procedures.

o UTILIZE INFORMATION TECHNOLOGY. The Company has developed PAWNLINK(TM), a
proprietary software system, which is connected to a "wide area network"
that allows for real-time point of sale connectivity. PAWNLINK(TM) is a
user friendly, menu driven software package that operates in a Windows
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.

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

LENDING OPERATIONS

The Company is a financial services and specialty retail enterprise
principally engaged in developing and operating stores which advance money
secured by the pledge of tangible personal property and sell pre-owned
merchandise to the value-conscious

22
<PAGE> 25

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 to cover costs such as storage,
insurance, title investigation and other transaction costs. 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 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. 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. However, historically, the Company has experienced profits
from the sale of such merchandise.

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, with a maximum holding period of 90 days, whereby the
customer agrees to purchase an item by making an initial cash deposit
representing at least 20% 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 and previous payments are forfeited to the
Company.

FRANCHISING

The Company's business strategy is to continue expanding its pawnshop
business within new geographic markets through its franchising operation. The
Company is prepared to begin offering single store and multi-store franchises
throughout the United States. Although, the Company is currently legally
permitted to offer and sell its franchises in over 40 states, no franchise has
been sold as of the date of this Prospectus. The Company's franchises will
generally be offered directly by the Company.

Although no assurances can be given that the Company will be able to sell
any franchises, the Company believes that it offers potential franchisees with
the following benefits:

o Site Selection and Store Opening Assistance. The Company plans to visit
each franchisee market area and will provide extensive demographic data to
assist each franchisee in selecting the location of his PAWNMART(sm) store.
Once a site is chosen, the Company will provide advice throughout the lease
negotiation, building and store opening process.

o Opening Inventory. Each PAWNMART(sm) franchise must open with an initial
assortment of retail merchandise. The Company intends to provide each
franchisee with a balanced opening inventory of attractive and desirable
merchandise. Inventory is planned to be sold to each franchisee at
wholesale prices, and may be exchanged for similar merchandise during the
first six months of operations.

23
<PAGE> 26

o Marketing and Advertising. The Company plans to assist each franchisee in
developing a marketing plan directed to consumers in each market area.
PAWNMART(sm) advertising materials are planned to be provided to each
franchisee.

o Accounting and Payroll Services. The Company intends to offer optional
accounting and payroll services to franchisees. Easy and efficient data
access through the PAWNLINK(TM) software system, combined with the
Company's internal accounting department should allow the Company to
provide cost-effective accounting and payroll management assistance.
Accounting services may include the preparation of monthly financial
statements, bank statement reconciliation, accounts payable reports and
general ledger information.

o Jewelry Cleaning and Assessment. The Company operates an in-house jewelry
center for its PAWNMART(sm) stores. The Company contemplates that each
franchisee can utilize this expert facility to restore and refurbish each
franchisee's "out of pawn" jewelry.

o Franchise Training. The Company has developed a comprehensive management
training program for PAWNMART(sm) franchisees. Franchisee training includes
an in-depth analysis of the pawn industry and PAWNMART(sm) management,
merchandising and store operation practices. Franchisee training involves
active, hands-on participation in mock negotiations, loan transactions,
inventory control procedures and jewelry evaluation. Use of the
PAWNLINK(TM) information system also forms an integral part of the training
program.

o Ongoing Franchisee Support. The Company plans that a Company employed
professional district manager will be assigned to each PAWNMART(sm)
franchisee. The Company anticipates that each district manager will visit
their store on a regular basis to provide ongoing support.

PROPERTIES

The Company's corporate offices are leased under a five year lease expiring
in May 1999. As of the date of this Prospectus, the Company operated 19 leased
store locations with monthly rental payments ranging from $2,000 to $6,250 per
location and having initial lease terms expiring from January 1999 through May
2002. All of the Company's leased locations include renewal options. The size of
the leased store locations range from approximately 4,000 to 12,000 square feet.
With the exception of the location in Weatherford, Texas, the Company leases all
of these properties from unaffiliated third parties. See "Certain Transactions."
The following table sets forth, as of the date of this Prospectus, 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>

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.

24
<PAGE> 27

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(sm)." The Company has filed applications to register the
"PAWNMART(sm)" marks and descriptive logos and phrases with the United States
Patent and Trademark Office. However, such trademark protection has not been
granted as of the date of this filing.

Personnel. As of December 1, 1997, the Company has a total of 115 employees
(of which 14 were in executive, administrative, clerical and accounting
functions), 59 of whom were salaried and 56 of whom were hourly employees. 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's stores are positioned similarly to national discount stores.
They are attractive, clean, well-lit and conveniently located. Merchandise is
displayed in an organized, easy-to-shop manner and the Company's stores do not
retail handguns or assault rifles. The Company believes that this positioning
provides a more comfortable and desirable shopping experience with better
customer demographics.

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.

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

25
<PAGE> 28

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.

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.

26
<PAGE> 29

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.

27
<PAGE> 30

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.

28
<PAGE> 31

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 co-founder 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 263,788 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 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.

29
<PAGE> 32

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
494,602 shares. As of the date of this Prospectus, options for 308,764 shares of
Common Stock had been granted and are outstanding under the Plan. All options
have an exercise price of $3.79 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.

30
<PAGE> 33

FINANCIAL RESTRUCTURING

CERTAIN TRANSACTIONS

In July of 1997, Mr. Thompson acquired an aggregate of 375,000 shares of
Series D Preferred Stock for $750,000 in connection with Mr. Thompson's becoming
a Chief Executive Officer of the Company. In connection with the Offering, the
375,000 shares of Series D Preferred Stock will automatically be converted into
187,500 shares of Common Stock at a conversion price of $4.00. 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 Preferred Stock for
$100,000 in connection with Mr. Standifer's becoming a Director of the Company.
In connection with the Offering, the 50,000 shares of Series D Preferred Stock
will automatically be converted into 25,000 shares of Common Stock at a
conversion price of $4.00.

In consideration for serving as a Director of the Company, in September
1997, Mr. Berk received 8,243 shares of Common Stock; in April 1996 and August
1997, Mr. Camp received an aggregate amount of 16,487 shares of Common Stock; in
September 1997, Mr. Kane received 8,243 shares of Common Stock; in September
1997, Mr. Standifer received 8,243 shares of Common Stock and in April 1996 and
August 1997, Mr. Thompson received 8,243 and 4,946 shares of Common Stock,
respectively. In connection with his employment with the Company, in August
1997, Mr. Bourland received 16,487 shares of Common Stock. In connection with
joining the Company, in October 1997, Mr. White received 8,243 shares of Common
Stock.

The Company's Weatherford, Texas store is leased under a five year lease
agreement with a joint venture owned by Joe Owens, a principal stockholder, and
another stockholder. The terms of the lease agreement include monthly rental
payments of $4,000 and an initial lease term which expires on February 1, 1999.

31
<PAGE> 34

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of the date of this
Prospectus, on a pro forma basis before the Offering and as adjusted to reflect
the sale of 1,200,000 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
of Beneficial Owners Number of Shares Before Offering After Offering
- -------------------- ---------------- --------------- --------------

<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS:

Carson R. Thompson(2)........ 341,406 5.9% 4.9%

Robert D. Bourland,
Jr.(2)....................... 74,083 1.3% 1.1%

Thomas W. White(2)........... 8,243 * *

Randall L. Haden(2).......... 35,351 * *

Robert E. Camp(3)............ 16,487 * *

James E. Berk (4)............ 8,243 * *

Monty R. Standifer(5)........ 8,243 * *

Mark E. Kane(6).............. 8,243 * *

All directors and
executive officers as a
group (8 persons)............ 500,299 8.6% 7.1%

OTHER SIGNIFICANT
HOLDERS:

Joe Owens(7)................. 317,913 5.5% 4.5%
</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 1, Box 202, North Hero, Vermont
05474.

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

(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.

32
<PAGE> 35

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, 7,000,000 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 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.

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<PAGE> 36

SERIES A WARRANTS

The Series A Warrants will be issued in registered form pursuant to an
agreement dated the date of this Prospectus (the "Series A Warrant Agreement"),
between the Company and Harris Trust and Savings Bank, N.A., Chicago, Illinois,
as the Warrant Agent (the"Warrant Agent"). The following discussion of certain
terms and provisions of the Series A Warrants is qualified in its entirety by
reference to the Series A Warrant Agreement. A form of the certificate
representing the Series A Warrants which form a part of the Series A Warrant
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.

Each of the Series A Warrants entitles the registered holder to purchase
one share of Common Stock. The Series A Warrants are exercisable at a price
equal to $6.00 (which exercise price has been arbitrarily determined by the
Company and the Representative) subject to certain adjustments. The Series A
Warrants are entitled to the benefit of adjustments in their exercise prices and
in the number of shares of Common Stock or other securities deliverable upon the
exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.

The Series A Warrants may be exercised at any time and continuing
thereafter until the close of five years from the date hereof, unless such
period is extended by the Company. After the expiration date, Series A Warrant
holders shall have no further rights. Series A Warrants may be exercised by
surrendering the certificate evidencing such Series A Warrant, with the form of
election to purchase on the reverse side of such certificate properly completed
and executed, together with payment of the exercise price and any transfer tax,
to the Warrant Agent. If less than all of the Series A Warrants evidenced by a
warrant certificate are exercised, a new certificate will be issued for the
remaining number of Series A Warrants. Payment of the exercise price may be made
by cash, bank draft or official bank or certified check equal to the exercise
price.

Series A Warrant holders do not have any voting or any other rights as
shareholders of the Company. The Company has the right at any time beginning six
months from the date hereof to redeem the Series A Warrants, at a price of $.05
per Series A Warrant, by written notice to the registered holders thereof,
mailed not less than 30 nor more than 60 days prior to the Redemption Date. The
Company may exercise this right only if the closing bid price for the Common
Stock for seven trading days during a 10 consecutive trading day period ending
no more than 15 days prior to the date that the notice of redemption is given,
equals or exceeds $9.00 per share, subject to adjustment. If the Company
exercises its right to call Series A Warrants for redemption, such Series A
Warrants may still be exercised until the close of business on the day
immediately preceding the Redemption Date. If any Series A Warrant called for
redemption is not exercised by such time, it will cease to be exercisable, and
the holder thereof will be entitled only to the repurchase price. Notice of
redemption will be mailed to all holders of Series A Warrants of record at least
30 days, but not more than 60 days, before the Redemption Date. The foregoing
notwithstanding, the Company may not call the Series A Warrants at any time that
a current registration statement under the Act is not then in effect. Any
redemption of the Series A Warrants during the one-year period commencing on the
date of this Prospectus shall require the written consent of the Representative.

The Series A Warrant Agreement permits the Company and the Warrant Agent
without the consent of Series A Warrant holders, to supplement or amend the
Series A Warrant Agreement in order to cure any ambiguity, manifest error or
other mistake, or to address other matters or questions arising thereafter that
the Company and the Series A Warrant Agent deem necessary or desirable and that
do not adversely affect the interest of any Series A Warrant holder. The Company
and the Warrant Agent may also supplement or amend the Series A Warrant
Agreement in any other respect with the written consent of holders of not less
than a majority in the number of the Series A Warrants then outstanding;
however, no such supplement or amendment may (i) make any modification of the
terms upon which the Series A Warrants are exercisable or may be redeemed; or
(ii) reduce the percentage interest of the holders of the Series A Warrants
without the consent of each Series A Warrant holder affected thereby.

In order for the holder to exercise a Series A Warrant, there must be an
effective registration statement, with a current prospectus on file with the
Commission covering the shares of Common Stock underlying the Series A Warrants,
and the issuance of such shares to the holder must be registered, qualified or
exempt under the laws of the state in which the holder resides. If required, the
Company will file a new registration statement with the Commission with respect
to the securities underlying the Series A Warrants prior to the exercise of such
Series A Warrants and will deliver a prospectus with respect to such securities
to all holders thereof as required by Section 10(a)(3) of the Act. See "Risk
Factors--Necessity to Maintain Current Prospectus and Registration Statement"
and "State Blue Sky Registration Required to Exercise Warrants."

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<PAGE> 37

SERIES B WARRANTS

The Series B Warrants will be issued in registered form pursuant to an
agreement dated the date of this Prospectus (the "Series B Warrant Agreement"),
between the Company and the Warrant Agent. The following discussion of certain
terms and provisions of the Series B Warrants is qualified in its entirety by
reference to the Series B Warrant Agreement. A form of the certificate
representing the Series B Warrants which form a part of the Series B Warrant
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.

Each of the Series B Warrants entitles the registered holder to purchase
one share of Common Stock. The Series B Warrants are exercisable at a price
equal to $8.00 (which exercise price has been arbitrarily determined by the
Company and the Representative) subject to certain adjustments. The Series B
Warrants are entitled to the benefit of adjustments in their exercise prices and
in the number of shares of Common Stock or other securities deliverable upon the
exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.

The Series B Warrants may be exercised at any time and continuing
thereafter until the close of six years from the date hereof, unless such period
is extended by the Company. After the expiration date, Series B Warrant holders
shall have no further rights. Series B Warrants may be exercised by surrendering
the certificate evidencing such Series B Warrant, with the form of election to
purchase on the reverse side of such certificate properly completed and
executed, together with payment of the exercise price and any transfer tax, to
the Warrant Agent. If less than all of the Series B Warrants evidenced by a
warrant certificate are exercised, a new certificate will be issued for the
remaining number of Series B Warrants. Payment of the exercise price may be made
by cash, bank draft or official bank or certified check equal to the exercise
price.

Series B Warrant holders do not have any voting or any other rights as
shareholders of the Company. The Company has the right at any time beginning six
months from the date hereof to redeem the Series B Warrants, at a price of $.05
per Series B Warrant, by written notice to the registered holders thereof,
mailed not less than 30 nor more than 60 days prior to the Redemption Date. The
Company may exercise this right only if the closing bid price for the Common
Stock for seven trading days during a 10 consecutive trading day period ending
no more than 15 days prior to the date that the notice of redemption is given,
equals or exceeds $11.00 per share, subject to adjustment. If the Company
exercises its right to call Series B Warrants for redemption, such Series B
Warrants may still be exercised until the close of business on the day
immediately preceding the Redemption Date. If any Series B Warrant called for
redemption is not exercised by such time, it will cease to be exercisable, and
the holder thereof will be entitled only to the repurchase price. Notice of
redemption will be mailed to all holders of Series B Warrants of record at least
30 days, but not more than 60 days, before the Redemption Date. The foregoing
notwithstanding, the Company may not call the Series B Warrants at any time that
a current registration statement under the Act is not then in effect. Any
redemption of the Series B Warrants during the one-year period commencing on the
date of this Prospectus shall require the written consent of the Representative.

The Series B Warrant Agreement permits the Company and the Warrant Agent
without the consent of Series B Warrant holders, to supplement or amend the
Series B Warrant Agreement in order to cure any ambiguity, manifest error or
other mistake, or to address other matters or questions arising thereafter that
the Company and the Series B Warrant Agent deem necessary or desirable and that
do not adversely affect the interest of any Series B Warrant holder. The Company
and the Warrant Agent may also supplement or amend the Series B Warrant
Agreement in any other respect with the written consent of holders of not less
than a majority in the number of the Series B Warrants then outstanding;
however, no such supplement or amendment may (i) make any modification of the
terms upon which the Series B Warrants are exercisable or may be redeemed; or
(ii) reduce the percentage interest of the holders of the Series B Warrants
without the consent of each Series B Warrant holder affected thereby.

In order for the holder to exercise a Series B Warrant, there must be an
effective registration statement, with a current prospectus on file with the
Commission covering the shares of Common Stock underlying the Series B Warrants,
and the issuance of such shares to the holder must be registered, qualified or
exempt under the laws of the state in which the holder resides. If required, the
Company will file a new registration statement with the Commission with respect
to the securities underlying the Series B Warrants prior to the exercise of such
Series B Warrants and will deliver a prospectus with respect to such securities
to all holders thereof as required by Section 10(a)(3) of the Act. See "Risk
Factors--Necessity to Maintain Current Prospectus and Registration Statement"
and "State Blue Sky Registration Required to Exercise Warrants."

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<PAGE> 38

REPRESENTATIVE WARRANTS

At the closing of this Offering, the Company will issue to the
Representative or its designees, for nominal consideration, Representative's
Warrants to purchase up to 120,000 shares, 120,000 Series A Warrants and 120,000
Series B Warrants. The Representative's Warrants are exercisable for a four-year
period commencing one year from the effective date of this Offering at a
purchase price of 120% of the Initial Public Offering price of the Securities.
In addition, the Company has granted to the Representative certain registration
rights with respect to registration of the shares of Common Stock and the
Warrants underlying the Representative's Warrants (the "Underlying Warrants")
and the shares of Common Stock issuable upon exercise of the Underlying
Warrants. The Company has agreed to pay the Representative upon the exercise or
redemption of the Warrants a fee equal to 5% of the gross proceeds received by
the Company from the exercise of the Warrants and 5% of the aggregate redemption
price for Warrants redeemed. Such fee will be paid to the Representative or its
designee no sooner than 12 months after the effective date of this Offering. The
Company has agreed to indemnify the Underwriter against certain liabilities
arising under the Securities Act of 1933. See "Underwriting."

OTHER WARRANTS

Presently, the Company has outstanding warrants to purchase an aggregate of
213,455 shares of Common Stock at an exercise price of $5.50 per share. In
connection with the Preferred Stock Conversion and Debenture Conversion, the
Company has granted holders of these warrants certain piggy-back registration
rights. These warrants expire January 2, 2002.

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.

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<PAGE> 39

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
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 and Warrants is
Harris Trust and Savings Bank, N.A., Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 7,000,000 shares of
Common Stock outstanding. All of the 1,200,000 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 5,800,000 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 be held for a period of one year from the
effective date of this Offering. 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 (70,000
shares immediately after this Offering) or (ii) the average weekly trading
volume of the Company's Common Stock 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 affiliates
of the Company for the three months preceding such sale. An aggregate of 494,602
shares of Common Stock has been reserved for issuance to employees of the
Company pursuant to the Plan. In addition, an aggregate of 263,788 shares of
Common Stock have been reserved for issuance to directors of the Company
pursuant to the Directors' Option Plan.

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<PAGE> 40

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 Representative not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock for a period of one year from the
effective date of this Offering without the prior written consent of the
Representative.

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.

REGISTRATION RIGHTS

Upon the expiration of the contractual one-year lock-up period described
above, certain shares issued or issuable upon the exercise of options granted
prior to the date of this Prospectus also may be issuable for sale in the public
market pursuant to Rule 701 under the Securities Act. In general, Rule 701
permits resales of shares issued pursuant to certain compensatory benefit plans
and contracts commencing at the end of the 90 day period after the Company
becomes subject to the reporting requirements of the Exchange Act.

The Company intends to file a registration statement under the Securities
Act to register all shares of Common Stock issuable pursuant to the Company's
Stock Option Plan. See "Management--Stock Option Plan." Subject to the
completion of the one-year period described above, shares of Common Stock issued
after the effective date of such registration statement upon the exercise of
awards issued under such plan generally will be eligible for sale in the public
market.

The Company cannot predict the effect, if any, that sales of restricted
securities or the availability of such securities for sale could have on the
market price, if any, prevailing from time to time. Nevertheless, sales of
substantial amounts of the Company's securities, including the securities
offered hereby, could adversely affect prevailing market prices of the Company's
securities and the Company's ability to raise additional capital by occurring at
a time when it would be beneficial for the Company to sell securities.

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<PAGE> 41

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriter named below, for whom First London Securities Corporation is acting
as the Representative, have severally agreed to purchase from the Company an
aggregate of 1,200,000 shares of Common Stock, 1,200,000 Series A Warrants and
1,200,000 Series B Warrants. The number of shares of Common Stock and Warrants
which each Underwriter has agreed to purchase is set forth opposite its name.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES NUMBER OF SERIES A NUMBER OF SERIES B
WARRANTS WARRANTS

<S> <C> <C> <C>
First London Securities Corporation

Total 1,200,000 1,200,000 1,200,000
========= ========= =========
</TABLE>

The Securities are offered by the Underwriter subject to prior sale, when,
as and if delivered to and accepted by the Underwriter and subject to approval
of certain legal matters by counsel and certain other conditions. The
Underwriter is committed to purchase all Securities offered by this Prospectus,
if any are purchased.

The Company has been advised by the Representative that the Underwriter
proposes initially to offer the Securities offered hereby to the public at the
offering price set forth on the cover page of this Prospectus. The
Representative has advised the Company that the Underwriter proposes to offer
the Securities through members of the NASD, and may allow a concession, in their
discretion, to certain dealers who are members of the NASD and who agree to sell
the Securities in conformity with the NASD Conduct Rules. Such concessions shall
not exceed the amount of the underwriting discount that the Underwriter is to
receive.

The Company has granted to the Representative an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 180,000
shares of Common Stock, an additional 180,000 Series A Warrants and an
additional 180,000 Series B Warrants at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus (the
"Over-Allotment Option"). The Representative may exercise the Over-Allotment
Option solely to cover over-allotments in the sale of the Securities being
offered by this Prospectus.

Officers and directors of the Company may introduce the Representative to
persons to consider the Offering and purchase Securities either through the
Representative, other Underwriters, or through participating dealers. In this
connection, officers and directors will not receive any commissions or any other
compensation.

The Company has agreed to pay the Representative a commission of 10% of the
gross proceeds of the Offering (the "Underwriting Discount"), including the
gross proceeds from the sale of the Over-Allotment Option, if exercised. In
addition, the Company has agreed to pay to the Representative a non-accountable
expense allowance of three percent (3%) of the gross proceeds of this Offering,
including proceeds from any Securities purchased pursuant to the Over-Allotment
Option. The Representative's expenses in excess of the non-accountable expense
allowance will be paid by the Representative. To the extent that the expenses of
the Representative are less than the amount of the non-accountable expense
allowance received, such excess shall be deemed to be additional compensation to
the Representative. The Company has agreed to pay the Representative upon the
exercise or redemption of the Warrants a fee equal to 5% of the gross proceeds
received by the Company from the exercise of the Warrants and 5% of the
aggregate redemption price for Warrants redeemed. Such fee will be paid to the
Representative or its designees no sooner than 12 months after the effective
date of this Offering. The Representative has informed the Company

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<PAGE> 42

that they do not expect sales to discretionary accounts to exceed 5% of the
total number of Securities offered by the Company hereby.

Prior to this Offering, there has been no public market for the Securities.
Consequently, the initial public offering price for the Securities, and the
terms of the Warrants (including the exercise price of the Warrants), have been
determined by negotiation between the Company and the Representative. Among the
factors considered in determining the public offering price were the history of,
and the prospect for, the Company's business, an assessment of the Company's
management, its past and present operations, the Company's development and the
general condition of the securities market at the time of this Offering. The
initial public offering price does not necessarily bear any relationship to the
Company's assets, book value, earnings or other established criteria of value.
Such price is subject to change as a result of market conditions and other
factors, and no assurance can be given that a public market for the Common Stock
or Warrants will develop after the close of this Offering, or if a public market
in fact develops, that such public market will be sustained, or that the Common
Stock or Warrants can be resold at any time at the offering or any other price.
See "Risk Factors."

At the closing of this Offering, the Company will issue to the
Representative or its designee, for nominal consideration, Representative's
Warrants to purchase up to 120,000 shares of Common Stock, 120,000 Series A
Warrants and 120,000 Series B Warrants. The Representative's Warrants will be
exercisable for a four-year period commencing one year from the effective date
of this Offering at a purchase price of 120% of the price at which the Common
Stock and Warrants are sold to the public, subject to adjustment. The
Representative's Warrants will not be transferable, except (i) to officers of
the Representative, other Underwriters, and officers and partners thereof; (ii)
by will; or (iii) by operation of law. The Representative's Warrants contain
provisions providing for appropriate adjustment in the event of any merger,
consolidation, recapitalization, reclassification, stock dividend, stock split
or similar transaction. The Representative's Warrants contain net issuance
provisions permitting the holders thereof to elect to exercise the
Representative's Warrants in whole or in part and instruct the Company to
withhold from the securities issuable upon exercise, a number of securities,
valued at the current fair market value on the date of exercise, to pay the
exercise price. Such net exercise provision has the effect of requiring the
Company to issue shares of Common Stock without a corresponding increase in
capital. A net exercise of the Representative's Warrants will have the same
dilutive effect on the interests of the Company's stockholders as will a cash
exercise. The Representative's Warrants do not entitle the holders thereof to
any rights as a shareholder of the Company until such Representative's Warrants
are exercised and shares of Common Stock are purchased thereunder.

The Company has granted to the holders of the Representative's Warrants
certain rights with respect to registration of the Shares, the Underlying
Warrants and the Common Stock issuable upon exercise of the Representative's
Warrants (the "Registrable Securities") under the Securities Act. For a period
of four years commencing one year following the date of this Prospectus, the
holders representing more than 50% of the Registrable Securities may require the
Company at the Company's sole expense to prepare and file one registration
statement under the Securities Act with respect to the Registrable Securities.
For a period of four years commencing one year following the date of this
Prospectus, the holders representing more than 50% of the Registrable Securities
also have the right at the Representative's or holders' expense to require the
Company to prepare and file one registration statement with respect to the
Registrable Securities. In addition, subject to certain limitations, in the
event the Company proposes to register any of its securities under the
Securities Act during the seven year period following the date of this
Prospectus, the holders of the Registrable Securities are entitled to notice of
such registration and may elect to include the Registrable Securities held by
them in such registration statement at the sole expense of the Company.

The Company has agreed to indemnify the Underwriter against any costs or
liabilities incurred by the Underwriter by reasons of misstatements or omissions
to state material facts in connection with the statements made in the
Registration Statement and the Prospectus. The Underwriter has in turn agreed to
indemnify the Company against any liabilities by reason of misstatements or
omissions to state material facts in connection with the statements made in the
Prospectus, based on information relating to the Underwriter and furnished in
writing by the Underwriter. To the extent that this section may purport to
provide exculpation from possible liabilities arising from the federal
securities laws, in the opinion of the Commission, such indemnification is
contrary to public policy and therefore unenforceable.

The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement which are filed as exhibits to the Registration
Statement. See "Available Information."

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<PAGE> 43

LEGAL MATTERS

The validity of the Securities 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 Securities offered hereby will be
passed on for the Underwriter by Jackson Walker L.L.P., Dallas, Texas. Members
of Jordaan & Pennington, P.L.L.C. own beneficially an aggregate of 90,677 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.

41
<PAGE> 44
PAWNMART, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholder's Equity (Deficit) F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
</TABLE>

F-1
<PAGE> 45
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 28, 1996 and January 26, 1997, 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 28, 1996 and January 26, 1997, 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> 46

PAWNMART, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

Pro Forma
January 28, January 26, October 26, October 26, 1997
1996 1997 1997 (note 2(o))
----- ---- ---- -----------
Assets (Unaudited) (Unaudited)

<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 126,918 142,993 166,776 166,776
Accounts receivable 10,239 22,735 38,073 38,073
Pawn service charges receivable 207,746 229,918 250,606 250,606
Loans (note 5) 1,446,503 2,227,565 2,426,158 2,426,158
Inventories, net (note 5) 1,489,529 1,970,741 2,227,782 2,227,782
Prepaid expenses and other current assets 47,230 18,117 177,079 177,079
---------- ---------- ---------- ----------
Total current assets 3,328,165 4,612,069 5,286,474 5,286,474
---------- ---------- ---------- ----------

Property and equipment, net (notes 3 and 5) 1,205,245 1,049,281 879,258 879,258

Goodwill and other intangible assets, net (note 4) 182,781 122,787 77,792 77,792

Debt issuance costs, net of accumulated amortization of $101,480,
$329,838, $525,063 and $212,655 at January 28, 1996, January 26,
1997, October 26, 1997 (actual)
and October 26, 1997 (pro forma), respectively (note 5) 408,535 555,262 612,438 63,545

Other assets 123,864 134,296 180,801 180,801
---------- ---------- ---------- ----------

$5,248,590 6,473,695 7,036,763 6,487,870
========== ========== ========== ==========
Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
Accounts payable, including $80,000 to a company
owned by a stockholder at January 26, 1997 $ 299,727 331,489 163,569 163,569
Bank overdraft 28,347 109,915 -- --
Accrued interest payable 88,281 103,291 131,838 131,838
Accrued payroll and payroll taxes 147,044 384,930 109,185 109,185
Deferred rent 112,722 115,316 115,316 115,316
Accrued bonuses 79,708 78,573 25,721 25,721
Other accrued expenses 128,402 284,130 141,145 141,145
Current installments of notes payable, including $103,100,
$50,000 and $50,000 payable to stockholders at
January 28, 1996, January 26, 1997 and October 26, 1997
(actual) and (pro forma), respectively (note 5) 193,100 1,056,667 1,554,032 1,554,032
---------- ---------- ---------- ----------
Total current liabilities 1,077,331 2,464,311 2,240,806 2,240,806
---------- ---------- ---------- ----------

Long-term notes payable, net of current
installments (note 5) 5,445,150 8,287,333 10,272,000 752,000
---------- ---------- ---------- ----------
Total liabilities 6,522,481 10,751,644 12,512,806 2,992,806
---------- ---------- ---------- ----------
</TABLE>

F-3

<PAGE> 47

PAWNMART, INC. AND SUBSIDIARIES

Consolidated Balance Sheets - Continued

Pro Forma
January 28, January 26, October 26, October 26, 1997
1996 1997 1997 note 2(o)
---- ---- ---- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
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 20,000 --
Series B Convertible Preferred stock; 1,074,626, 1,089,020,
and 1,091,858 shares issued at January 28, 1996, January 26,
1997 and October 26, 1997, respectively (liquidation
preference of $2.00 per share) 10,746 10,890 10,918 --
Series C Convertible Preferred stock; 26,842 shares issued
and outstanding at October 26, 1997 (liquidation preference
of $2.50 per share) -- -- 269 --
12% Series D Convertible Exchangeable Preferred stock;
542,500 shares issued and outstanding at October 26, 1997
(liquidation preference of $2.00 per share) -- -- 5,425 --
Common stock, $.01 par value; authorized 20,000,000 shares;
1,759,071 shares issued and outstanding at January 28, 1996
and 1,844,998, 1,950,424 and 5,821,432 shares issued at
January 26, 1997, October 26, 1997 (actual) and October 26,
1997 (pro forma), respectively 17,591 18,450 19,504 58,214
Additional paid-in capital 3,209,553 3,275,807 4,453,588 16,625,894
Accumulated deficit (4,481,781) (7,538,096) (9,915,747) (13,119,044)
----------- ----------- ----------- -----------
(1,223,891) (4,212,949) (5,406,043) 3,565,064
----------- ----------- ----------- -----------
Less treasury stock, at cost; 25,000 Series B Convertible
Preferred shares at January 28, 1996, 9,892 common shares
and 25,000 Series B Convertible Preferred shares at
January 26, 1997, 13,189 common shares and 25,000
Series B Convertible Preferred shares at October 26, 1997
(actual), and 21,432 common shares at October 26, 1997
(pro forma) (note 7) (50,000) (65,000) (70,000) (70,000)
----------- ----------- ----------- -----------

Total stockholders' equity (deficit) (1,273,891) (4,277,949) (5,476,043) 3,495,064

Commitments, contingencies and subsequent events
(notes 9, 11 and 12)
----------- ----------- ----------- -----------
$ 5,248,590 6,473,695 7,036,763 6,487,870
=========== =========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 48

PAWNMART, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years Ended January 28, 1996 and January 26, 1997 and the Nine
Months Ended October 27, 1996 and October 26, 1997

Year Ended Year Ended Nine Months Nine Months
January 28, January 26 Ended October Ended October
1996 1997 27, 1996 26, 1997
---- ---- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 3,051,678 5,522,731 3,887,577 4,981,240
Pawn service charges 1,337,618 2,291,104 1,622,310 2,106,525
Other 34,206 89,567 8,050 67,320
----------- ----------- ----------- -----------
Total revenues 4,423,502 7,903,402 5,517,937 7,155,085

Cost of sales 1,941,489 3,527,670 2,540,902 3,458,769
----------- ----------- ----------- -----------
2,482,013 4,375,732 2,977,035 3,696,316
----------- ----------- ----------- -----------

Expenses:
Operating 2,625,716 3,863,843 2,553,588 2,788,950
Interest (note 5) 720,301 1,360,511 947,015 1,355,951
Depreciation 315,028 435,131 344,559 332,099
Amortization 59,995 59,994 44,995 44,995
Administrative (note 7) 1,588,600 1,712,568 1,343,400 1,518,913
----------- ----------- ----------- -----------
Total expenses 5,309,640 7,432,047 5,233,557 6,040,908
----------- ----------- ----------- -----------

Net loss $(2,827,627) (3,056,315) (2,256,522) (2,344,592)
=========== =========== =========== ===========

Pro forma
loss per common
share (note 2(o)) $ (0.34) $ (0.19)

============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 49

PAWNMART, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)

Years Ended January 28, 1996 and January 26, 1997 and the Nine Months Ended
October 26, 1997

$.50 Series A Series B Series C
Convertible Convertible Convertible
Common stock Preferred stock Preferred stock Preferred Stock
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 29, 1995 1,604,766 $ 16,048 2,000,000 $ 20,000 448,139 $ 4,481 -- $ --

Issuance of common
stock (note 7) 154,305 1,543 -- -- -- -- -- --

Issuance of preferred
stock, net of $96,365 issue
costs (notes 7 and 10) -- -- -- -- 626,487 6,265 -- --

Acquisition of 25,000 shares
of Series B Convertible
Preferred stock (note 7) -- -- -- -- -- -- -- --

Capital contribution
for services (note 7) -- -- -- -- -- -- -- --

Net loss -- -- -- -- -- -- -- --

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

Balance at
January 28, 1996 1,759,071 17,591 2,000,000 20,000 1,074,626 10,746 -- --

Issuance of common
stock (note 7) 85,927 859 -- -- -- -- -- --

Issuance of preferred stock
(notes 7 and 10) -- -- -- -- 14,394 144 -- --

Acquisition of 9,892 shares
of common stock (note 7) -- -- -- -- -- -- -- --

Net loss -- -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at
January 26, 1997 1,844,998 18,450 2,000,000 20,000 1,089,020 10,890 -- --

Issuance of common stock
(Unaudited) 105,426 1,054 -- -- -- -- -- --

Acquisition of 3,297 shares of
common stock (Unaudited) -- -- -- -- -- -- -- --

Issuance of preferred stock
(Unaudited) -- -- -- -- 2,838 28 26,842 269

Dividends paid (Unaudited) -- -- -- -- -- -- -- --

Net loss (Unaudited) -- -- -- -- -- -- -- --

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

Balance at October 26, 1997
(Unaudited) 1,950,424 $ 19,504 2,000,000 $ 20,000 1,091,858 $ 10,918 26,842 $ 269
========== ========== ========== ========== ========== ========== ========== ==========

</TABLE>

F-6

<PAGE> 50

<TABLE>
<CAPTION>
Series D Total
Convertible Additional stockholders'
Preferred Stock paid-in Accumulated Treasury equity
Shares Amount capital deficit stock (deficit)
------ ------ ------- ------- ------ -------

<S> <C> <C> <C> <C> <C> <C>
Balance at
January 29, 1995 -- $ -- 2,036,072 (1,654,154) -- 422,447

Issuance of common
stock (note 7) -- -- 3,137 -- -- 4,680

Issuance of preferred
stock, net of $96,365 issue
costs (notes 7 and 10) -- -- 1,150,344 -- -- 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 -- -- 20,000

Net loss -- -- -- (2,827,627) -- (2,827,627)

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

Balance at
January 28, 1996 -- -- 3,209,553 (4,481,781) (50,000) (1,273,891)

Issuance of common
stock (note 7) -- -- 30,413 -- -- 31,272

Issuance of preferred stock
(notes 7 and 10) -- -- 35,841 -- -- 35,985

Acquisition of 9,892 shares
of common stock (note 7) -- -- -- -- (15,000) (15,000)

Net loss -- -- -- (3,056,315) -- (3,056,315)
---------- ---------- ---------- ---------- ---------- ----------

Balance at
January 26, 1997 -- -- 3,275,807 (7,538,096) (65,000) (4,277,949)

Issuance of common stock (Unaudited) -- -- 29,996 -- -- 31,050

Acquisition of 3,297 shares of
common stock (Unaudited) -- -- -- -- (5,000) (5,000)

Issuance of preferred stock (Unaudited) 542,500 5,425 1,147,785 -- -- 1,153,507

Dividends paid (Unaudited) -- -- -- (33,059) -- (33,059)

Net loss (Unaudited) -- -- -- (2,344,592) -- (2,344,592)

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

Balance at October 26, 1997
(Unaudited) 542,500 $ 5,425 4,453,588 (9,915,747) (70,000) (5,476,043)
========== ========== ========== ========== ========== ==========

</TABLE>

See accompanying notes to consolidated financial statements

F-7

<PAGE> 51

PAWNMART, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended January 28, 1996 and January 26, 1997 and the Nine
Months Ended October 27, 1996 and October 26, 1997

Year Ended Year Ended Nine Months Nine Months
January 28 January 26, Ended October Ended October
1996 1997 27, 1996 26, 1997
---- ---- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,827,627) (3,056,315) (2,256,522) (2,344,592)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 375,023 495,125 389,554 377,094
Amortization of debt issuance costs 92,696 228,358 145,610 195,225
Capital contribution for services 20,000 -- -- --
Common and preferred stock issued for 4,180 31,272 31,272 29,275
services
Changes in operating assets and liabilities:
Accounts receivable 18,440 (12,496) (36,840) (15,338)
Pawn service charges receivable (131,793) (22,172) (15,943) (20,688)
Inventories (929,663) (481,212) (405,347) (257,041)
Prepaid expenses and other current (21,128) 29,113 (7,549) (158,962)
assets
Other assets (63,520) (10,432) (232) (46,505)
Accounts payable (124,474) 31,762 204,958 (167,920)
Accrued liabilities 233,096 410,083 54,551 (443,035)
----------- ----------- ----------- -----------
Net cash used in operating
activities (3,354,770) (2,356,914) (1,896,488) (2,852,487)
----------- ----------- ----------- -----------

Cash flows from investing activities:
Net increase in pawn loans (875,426) (781,062) (721,035) (198,593)
Purchases of property and equipment (821,984) (279,167) (222,027) (162,076)
----------- ----------- ----------- -----------
Net cash used in investing
activities (1,697,410) (1,060,229) (943,062) (360,669)
----------- ----------- ----------- -----------

Cash flows from financing activities:
Proceeds from issuance of notes payable 4,558,550 4,269,168 3,265,821 2,589,203
Principal payments on notes payable (226,581) (563,418) (97,571) (107,171)
Proceeds from issuance of common stock 500 -- -- 2,500
Purchases of treasury stock -- (15,000) -- (5,000)
Payment of debt issuance costs (438,915) (375,085) (317,878) (252,401)
Net proceeds from issuance of preferred stock 1,156,609 35,985 28,889 1,152,782
Preferred stock dividends -- -- -- (33,059)
Increase (decrease) in bank overdraft 9,410 81,568 (28,347) (109,915)
----------- ----------- ----------- -----------
Net cash provided by financing
activities 5,059,573 3,433,218 2,850,914 3,236,939
----------- ----------- ----------- -----------

Net increase in cash and cash equivalents 7,393 16,075 11,364 23,783
Cash and cash equivalents at beginning of period 119,525 126,918 126,918 142,993
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 126,918 142,993 138,282 166,776
=========== =========== =========== ===========

Supplemental disclosures of cash flow information -
Cash paid for interest $ 652,669 1,341,293
=========== ===========

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-8
<PAGE> 52

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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.

Pawnloans (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.

(Continued)

F-9
<PAGE> 53

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies, Continued

(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. Deferred revenues totaling
$47,754 related to layaway sales are included in other accrued
expenses in the accompanying consolidated balance sheet at
January 26, 1997.

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.

(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.

(Continued)

F-10
<PAGE> 54

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies, Continued

(h) Income Taxes

The Company and its subsidiaries 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.

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.

(Continued)

F-11
<PAGE> 55

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies, Continued

(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.

(Continued)

F-12
<PAGE> 56

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies, Continued

(l) New Accounting Standards, Continued

In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
128, "Earnings per Share" (Statement No. 128), which is
required to be adopted for financial statements issued for
annual or interim periods after December 15, 1997. The
adoption of Statement 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 adoption
of Statement 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" (Statement No. 129). Statement No. 129
establishes standards for disclosing information about
entity's capital structure and applies to all entities.
Statement No. 129 continues the previous requirements to
disclose certain information about an entity's capital
structure found in APB Opinions No. 10, "Ominibus 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 APB Opinions 10 and 15 and Statement No. 47
and consolidates them for ease of retrieval and for greater
visibility to non-public entities. Statement 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
Statement No. 129 is adopted.

In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
(Statement No. 130). Statement 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. Statement 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. Statement 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. Statement 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.

(m) Reclassifications

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

(Continued)

F-13
<PAGE> 57

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies, Continued

(n) Interim Financial Data (Unaudited)

The accompanying consolidated balance sheet as of October 26,
1997, and the accompanying consolidated statements of
operations, and the accompanying consolidated statements of
stockholders' equity (deficit) for the nine months ended
October 26, 1997 and cash flows for the nine months ended
October 26, 1997 and October 27, 1996, have been prepared by
the Company without an audit. In the opinion of management,
all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation for
such periods have been made. Results for interim periods
should not be considered as indicative of results for a full
year.

Footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles have been omitted herein with respect to
the interim financial data.

(o) Pro Forma Balance Sheet (Unaudited) and Pro Forma Loss Per Share

The accompanying unaudited pro forma consolidated balance
sheet at October 26, 1997 gives effect to the planned
conversion of the Company's convertible subordinated
debentures and all classes of convertible preferred stock upon
completion of the Company's contemplated initial public
offering.

Transactions reflected in the pro forma adjustments to the balance
sheet include the following:

o The conversion of $9,520,000 in convertible subordinated
debentures, net of issuance costs totaling $548,893 at October
26, 1997 into 2,380,000 shares of common stock.

o Recognition of the value of the beneficial conversion features
totaling $3,203,297 related to amendments of the preferred
stock and convertible subordinated debenture agreements (see
note 12).

o The conversion of all outstanding preferred stock classes into
1,482,766 shares of common stock and the conversion of
preferred treasury stock into 8,243 shares of common stock.

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 subordinated debentures and all
classes of convertible preferred stock and related warrants,
the retroactive effect of the reverse stock splits discussed
in note 12 and stock options issued.

(Continued)

F-14
<PAGE> 58

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies, Continued

(o) Pro Forma Balance Sheet (Unaudited) and Pro Forma Loss Per Share,
Continued

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 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
$956,306 and $1,097,683 (unaudited) of interest expense and
amortization associated with debt issuance costs for the
fiscal year ended January 26, 1997 and the nine months ended
October 26, 1997, respectively. Pro forma net loss
attributable to common stockholders used to calculate the pro
forma loss per common share also excludes $33,059 (unaudited)
in Series D preferred stock dividends for the nine months
ended October 26, 1997. The pro forma weighted average number
of common and common equivalent shares outstanding was
6,145,847 and 6,398,644 (unaudited) for the fiscal year ended
January 26, 1997 and the nine months ended October 26, 1997,
respectively.

(3) Property and Equipment

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

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>

(Continued)

F-15
<PAGE> 59

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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>

(5) Notes Payable

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

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, 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
</TABLE>

(Continued)

F-16
<PAGE> 60

PCI CAPITAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(5) Notes Payable, Continued

1997 1996
---- ----
<S> <C> <C>
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>

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.

(Continued)

F-17

<PAGE> 61

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(5) Notes Payable, Continued

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 $9.10, 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, the 1999 Debentures will be automatically converted into
common stock at a conversion price equal to the lower of $9.10 in
principal amount per share or 80 percent of the contemplated initial
public offering price (note 12). 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, 2000 Debenture is convertible at any time into shares of
common stock at a conversion price of $9.10, 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,
the 2000 Debentures will be automatically converted into common stock
at a conversion price equal to the lower of $9.10 in principal amount
per share or 80 percent of the contemplated initial public offering
price (note 12). 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.

(Continued)

F-18
<PAGE> 62

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(5) Notes Payable, Continued

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 $9.10, 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, the 2001
Debentures will be automatically converted into common stock at a
conversion price equal to the lower of $9.10 in principal amount per
share or 80 percent of the contemplated initial public offering price
(note 12). 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 131,894 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 $5.50 per share and are
exercisable through January 2, 2002. At January 26, 1997, 97,280
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 43,965 shares of the
Company's common stock to participating NASD Broker-Dealers. The
warrants have an exercise price of $5.50 per share and are
exercisable through January 2, 2002. At January 26, 1997, 38,601
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 54,956 shares of the
Company's common stock to participating NASD Broker-Dealers. The
warrants have an exercise price of $5.50 per share and are
exercisable through January 2, 2002. At January 26, 1997, 6,287
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.

(Continued)

F-19
<PAGE> 63

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(5) Notes Payable, Continued

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 $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.

(Continued)

F-20
<PAGE> 64

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Equity Transactions, Continued

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 9,892
shares of common stock from a former officer of the Company at a
price of $1.52 per share.

During the fiscal years ended January 26, 1997 and January 28, 1996, the
Company issued 85,927 and 137,818 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 32,973 shares of the Company's common stock at an
exercise price of $.03 per share to a former director. On December
29, 1995, the former director exercised the warrant to purchase
16,487 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 21,433 shares of the Company's common stock,
at a price of $.76 per share, to two former directors and
nonqualified stock options to purchase an aggregate of 8,243 shares
of the Company's common stock, at a price of $6.07 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.

(Continued)

F-21
<PAGE> 65

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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 0.33 shares of
common stock, subject to adjustment should the Company pay common
stock dividends or initiate stock splits or similar changes to its
common stock. Shares of Series A are automatically convertible into
0.33 shares of 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 (note 12). 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 share of Series B is convertible at any time into 0.33 shares of
common stock, 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 shares 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 a conversion price equal to the lower
of $6.07 or 80 percent of the contemplated initial public offering
price (note 12). 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 percent of the Series B shares
sold by the NASD Broker-Dealers. The warrants have an exercise price
of $2.40 per share and are exercisable for four years commencing July
22, 1995. At January 26, 1997, 80,850 warrants had been granted. Upon
completion of the closing of a sale of the Company's common stock in
a public offering where the aggregate proceeds exceed $5,000,000, the
Series B stock purchase warrants will convert to 26,659 common stock
purchase warrants with an exercise price of $5.50 per share
exercisable through January 2, 2002 (note 12).

(Continued)

F-22
<PAGE> 66

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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:

Fiscal years ending Related
January Party Other Total
------- ----- ----- -----
<S> <C> <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.

(Continued)

F-23
<PAGE> 67

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) Subsequent Events

Subsequent to January 26, 1997, the Company issued 34,533 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. In connection with such issuances, the Company has
recorded administrative expenses totaling approximately $9,400 based
upon the Company's most recent independent valuation of common stock
of $0.27 per share at January 26, 1997.

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 $2.50 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 0.33 shares of
common stock, 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 shares 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 a conversion price equal to the lower
of $7.58 or 80 percent of the contemplated initial public offering
price (note 12). 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.

(Continued)

F-24

<PAGE> 68

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) Subsequent Events

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
0.33 shares of common stock, 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 shares 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 a
conversion price equal to the lower of $6.07 or 80 percent of the
contemplated initial public offering price (note 12). 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 44,628 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:

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

o 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 (see below).

o The Company approved the 1997 Director Stock Option Plan and the 1997
Employee Stock Option Plan to reserve 263,788 and 494,602 shares,
respectively, of common stock for issuance thereunder.

(Continued)

F-25
<PAGE> 69

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(12) Events Subsequent to Date of Independent Auditors' Report (Unaudited),
Continued

o The Company amended the conversion price related to the automatic
conversion of the convertible subordinated debentures in the event of
an initial public offering to be the lower of $9.10 principal amount
per share or 80 percent of the contemplated initial public offering
stock price. Such amendment was approved by the subordinated debt
holders on October 30, 1997. The Company will account for the value
of the resulting beneficial conversion feature as additional
financing costs by recording approximately $2,380,000 in debt
discount and additional paid-in-capital. Such amount will be
amortized into interest expense over the period from October 30, 1997
until the expected date of the contemplated initial public offering.

During January 1998, the Company announced its intention to submit the
following items for approval by its common and preferred
stockholders:

o The Company announced its intention to adopt an additional reverse
stock split of its issued and outstanding shares of common stock on a
basis of one new share for each 1.5163715 shares currently
outstanding. The effect of this 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.

o The Company announced its intention to amend the Series A, Series B,
Series C, and Series D Preferred stock certificates of designations
to change the conversion price related to the automatic conversion of
preferred stock in the event of an initial public offering to be
equal to the lower of the conversion price in effect at the time of
an initial public offering or 80 percent of the contemplated initial
public offering price. The Company will account for the value of the
resulting beneficial conversion feature as a return to the preferred
shareholders by recording $823,297 in preferred stock discounts and
additional paid-in capital. Such amounts will be amortized as a
return to the preferred shareholders using the effective interest
method over the period from the date such amendments are approved
until the expected date of the contemplated initial public offering.

On January 2, 1998, the Company's Board of Directors adopted a
resolution changing the exercise price for existing common stock
purchase warrants to be $5.50 per share and extending the period at
which such warrants are exercisable through January 2, 2002.

During November 1997, the Company entered into an unsecured line of
credit agreement with a stockholder to borrow up to $200,000. The
line of credit bears interest at 12 percent and is due on demand. At
January 7, 1998, the Company had outstanding borrowings of $175,000
under this line of credit.

(Continued)

F-26
<PAGE> 70

PAWNMART, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(12) Events Subsequent to Date of Independent Auditors' Report (Unaudited),
Continued

As of January 7, 1998, a total of 308,764 options to purchase common
stock at an exercise price of $3.79 had been granted under the 1997
Employee Stock Option Plan.

Subsequent to August 21, 1997, the Company issued 70,069 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. In connection with such issuances, the Company has
recorded administrative expenses totaling approximately $18,900 based
upon the Company's most recent independent valuation of common stock
of $0.27 per share at January 26, 1997.

F-27
<PAGE> 71
================================================================================

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 UNDERWRITER. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Financial Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . 31
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 32
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . 33
Shares Eligible for Future Sale . . . . . . . . . . . . . . . . . . . . . 37
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

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

UNTIL , 1998 (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.

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

1,200,000 SHARES OF COMMON STOCK

1,200,000 REDEEMABLE CLASS A
COMMON STOCK PURCHASE WARRANTS

1,200,000 REDEEMABLE CLASS B
COMMON STOCK PURCHASE WARRANTS

PAWNMART, INC.

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

PROSPECTUS

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

FIRST LONDON SECURITIES CORPORATION

February , 1998

================================================================================
<PAGE> 72

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 indemnification provided under the
agreement exceeds

II - 1
<PAGE> 73
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,442.94

NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,500.00

**Pacific Stock Exchange and
Nasdaq SmallCap Market Listing Fee . . . . . . . . . . . . . . . . . . . $ 30,000.00

**Agent's Non-accountable Expense Allowance . . . . . . . . . . . . . . . $186,750.00

**Printing and Engraving Expenses . . . . . . . . . . . . . . . . . . . . $ 30,000.00

**Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . $125,000.00

**Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . $ 50,000.00

**Blue Sky Taxes, Fees and Expenses . . . . . . . . . . . . . . . . . . . $ 5,000.00

*Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,307.06

**TOTAL $450,000.00
===========

</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 ended 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 ended 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 80,850 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 $2.40 per share and are exercisable for
four years commencing July 22, 1995. Upon the completion of the closing of a
sale of the Company's Common Stock in a public offering where the aggregate
proceeds exceed $5,000,000, the Series B stock purchase warrants will convert
to 26,659 Common Stock purchase warrants with an exercise price of $5.50 per
share exercisable through January 2, 2002.

II - 2
<PAGE> 74

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 97,280 Common Stock purchase warrants to participating NASD
Broker-Dealers. The warrants have an exercise price of $5.50 per share and are
exercisable through January 2, 2002.

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 connection with the 2000 Debentures, the
Company has issued 38,601 Common Stock purchase warrants to participating NASD
Broker-Dealers. The warrants have an exercise price of $5.50 per share and are
exercisable through January 2, 2002.

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 50,915 Common Stock purchase warrants to participating
NASD Broker-Dealers. The warrants have an exercise price of $5.50 per share
and are exercisable through January 2, 2002.

6. 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.

7. 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 26, 1997, the Company
issued 542,500 Series D shares with total proceeds received by the Company of
$1,085,000.

8. From January 13, 1994 through January 26, 1997, the Company issued
245,786 shares of Common Stock to certain officers, employees and other
individuals in exchange for Board of Director services, legal services,
consulting services and employment services. From January 27, 1997 to October
26, 1997, the Company issued 104,602 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 824
shares of Common Stock to an employee for $3.03 per share.

9. On December 29, 1995, a former director exercised a warrant to
purchase 16,487 shares of the Company's Common Stock at $.03 per share.

10. 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.

II - 3
<PAGE> 75

11. From January 1995 through November 1996, the Company issued
43,358 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 B at a price of $2.00 per share.

The sale of securities above were made in reliance upon Rule 701 which
provides for exemption for offers and sales of securities pursuant to
compensatory benefit plans and contracts relating to compensation and 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.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
1 *Form of Underwriting Agreement

3.1 **Restated and Amended Certificate of Incorporation

3.2 **Second Amended and Restated Bylaws of the Company

4.1 *Form of Series A Warrant Agreement

4.2 *Form of Series B Warrant Agreement

4.3 *Form of Certificate evidencing Common Stock

4.4 *Form of Representative's Warrants

5.1 *Opinion of Jordaan & Pennington, P.L.L.C. 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

27.1 Financial Data Schedule for October 26, 1997
(Filed in EDGAR version only)

27.2 Financial Data Schedule for January 26, 1997
(Filed in EDGAR version only)
</TABLE>

- ---------------------------
* To be filed by amendment.
** Previously Filed.

II - 4
<PAGE> 76
ITEM 28. UNDERTAKINGS

(a) The Company, a small business issuer, before the Offering had no 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.

(b) The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act
shall be deemed to be part of this Registration Statement as
of the time it was declared effective.

(2) 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.

(c) The Registrant hereby undertakes (1) to file, during any period in
which it offers or sells securities, a post-effective amendment to
this Registration Statement, to include any prospectus required by
section 10(a)(3) of the Act, to reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change
in the information in the Registration Statements, and to include any
additional or changed material information on the plan of
distribution; (2) that, for the purpose of determining any liability
under the Act, to treat each post-effective amendment as a new
Registration Statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and (3) to file a post-effective
amendment to remove from registration any of the securities being
registered which remain unsold at the termination of the Offering.

Insofar as indemnification for liabilities arising from the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant 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 Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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 Registrant 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.

II - 5
<PAGE> 77

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 January 14, 1998:

PAWNMART, INC.
(Registrant)

By: /s/ Carson R. Thompson By: /s/ Thomas W. White
----------------------------- -------------------------
Carson R. Thompson Thomas W. White
Chief Executive Officer Vice President - Finance and
(Principal Executive Officer) Accounting
(Principal Financial and
Accounting Officer)

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:

Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Carson R. Thompson Chief Executive Officer, Director and Chairman January 14, 1998
---------------------- of the Board
Carson R. Thompson

* President, Chief Operating Officer and January 14, 1998
----------------------------- Director
Robert Bourland, Jr.

* Vice President -- Finance and Accounting January 14, 1998
-----------------------------
Thomas W. White

* Vice President -- Information Services January 14, 1998
-----------------------------
Randy Haden

* Director January 14, 1998
-----------------------------
Robert E. Camp

* Director January 14, 1998
-----------------------------
James E. Berk

* Director January 14, 1998
-----------------------------
Monty R. Standifer

* Director January 14, 1998
-----------------------------
Mark E. Kane
</TABLE>

By: /s/ Carson R. Thompson
-----------------------------
CARSON R. THOMPSON
ATTORNEY-IN-FACT

<PAGE> 78

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
1 *Form of Underwriting Agreement

3.1 **Restated and Amended Certificate of Incorporation

3.2 **Second Amended and Restated Bylaws of the Company

4.1 *Form of Series A Warrant Agreement

4.2 *Form of Series B Warrant Agreement

4.3 *Form of Certificate evidencing Common Stock

4.4 *Form of Representative's Warrants

5.1 *Opinion of Jordaan & Pennington, P.L.L.C. 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

27.1 Financial Data Schedule for October 26, 1997
(Filed in EDGAR version only)

27.2 Financial Data Schedule for January 26, 1997
(Filed in EDGAR version only)
</TABLE>

- ---------------------------
* To be filed by amendment.
** Previously Filed.

<PAGE> 1
EXHIBIT 11

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

<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
January 26, October 26,
1997 1997
----------------------------------
<S> <C> <C>
Common Shares Outstanding at the Beginning of the Period (1) 1,759,071 1,835,106

Common Equivalent Shares Attributed to Stock Options, Warrants, and
Convertible Securities (2) 4,320,892 4,563,538

Weighted Average Number of Shares Issued During the Period 65,884 -
----------- ------------
Weighted Average Number of Common and Common Equivalent
Shares Outstanding at end of Period (2) 6,145,847 6,398,644
=========== ============

Net Loss As Reported $(3,056,315) $(2,344,592)

Pro Forma Adjustments (3) -
Interest Expense and Amortization of Debt Issuance Costs 956,306 1,097,683
Preferred Stock Dividends -- 33,059
Pro Forma Net Loss ----------- -----------
$(2,100,009) $(1,213,850)
=========== ===========

Pro Forma Net Loss Per Share (2)(3) ----------- -----------
$ (0.34) $ (0.19)
=========== ===========
</TABLE>

(1) Gives effect to a 1-for-2 reverse stock split of the Company's outstanding
shares of Common Stock approved on October 16, 1997 and to a 1-for-1.5163715
reverse stock splits of the Company's outstanding shares of Common Stock
approved in January 1998.

(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 splits approved on October 16, 1997 and during January 1998,
(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 $956,306, and $1,097,683 of interest
and amortization of debt issuance costs for the fiscal year ended January
26, 1997 and for the nine months ended October 26, 1997, respectively.
The pro forma adjustments result from the retroactive effect of the
Debenture Conversion. Pro forma net loss attributable to common
stockholders used to calculate the pro forma loss per common share also
excludes $33,059 in Series D Preferred stock dividends during the nine
months ended October 26, 1997 resulting from the Preferred 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
January 14, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PAWNMART, INC. AND SUBSIDIARIES AS OF AND
FOR THE NINE MONTHS ENDED OCTOBER 26, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-25-1998
<PERIOD-END> OCT-26-1997
<CASH> 166,776
<SECURITIES> 0
<RECEIVABLES> 2,714,837
<ALLOWANCES> 0
<INVENTORY> 2,227,782
<CURRENT-ASSETS> 5,286,474
<PP&E> 2,098,561
<DEPRECIATION> (1,219,303)
<TOTAL-ASSETS> 7,036,763
<CURRENT-LIABILITIES> 2,240,806
<BONDS> 10,272,000
0
36,612
<COMMON> 19,504
<OTHER-SE> (5,532,159)
<TOTAL-LIABILITY-AND-EQUITY> 7,036,763
<SALES> 4,981,240
<TOTAL-REVENUES> 7,155,083
<CGS> 3,458,769
<TOTAL-COSTS> 6,247,719
<OTHER-EXPENSES> 1,896,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,355,951
<INCOME-PRETAX> (2,344,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,344,592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,344,592)
<EPS-PRIMARY> 0
<EPS-DILUTED> (0.19)

</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PAWNMART, INC. AND SUBSIDIARIES AS OF AND
FOR THE YEAR ENDED JANUARY 26, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-END> JAN-26-1997
<CASH> 142,993
<SECURITIES> 0
<RECEIVABLES> 2,480,218
<ALLOWANCES> 0
<INVENTORY> 1,970,741
<CURRENT-ASSETS> 4,612,069
<PP&E> 1,935,189
<DEPRECIATION> (885,908)
<TOTAL-ASSETS> 6,473,695
<CURRENT-LIABILITIES> 2,464,311
<BONDS> 8,287,333
0
30,890
<COMMON> 18,450
<OTHER-SE> (4,327,289)
<TOTAL-LIABILITY-AND-EQUITY> 6,473,695
<SALES> 5,522,731
<TOTAL-REVENUES> 7,903,402
<CGS> 3,527,670
<TOTAL-COSTS> 7,391,513
<OTHER-EXPENSES> 2,207,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,360,511
<INCOME-PRETAX> (3,056,315)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,056,315)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,056,315)
<EPS-PRIMARY> 0
<EPS-DILUTED> (0.34)

</TABLE>