(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (512) 314-3400

____________________________________

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No__

Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

The only class of voting securities of the registrant issued and outstanding is the Class B Voting Common Stock, par value $.01 per share, 100% of which is owned by one record holder who is an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock. The aggregate market value of the Class A Non-voting Common Stock held by non-affiliates of the registrant as of December 1, 1999, based on the closing price on The Nasdaq Stock Market on such date, was $41 million.

As of December 1, 1999, 10,822,010 shares of the registrant's Class A Non-Voting Common Stock, par value $.01 per share and 1,190,057 shares of the registrant's Class B Voting Common Stock, par value $.01 per share were outstanding.

EZCORP, Inc. (the "Company") is a Delaware corporation; its principal executive offices are located at 1901 Capital Parkway, Austin, Texas 78746, and its telephone number is (512) 314-3400. As used herein, the Company includes the subsidiaries listed in Exhibit 22.1.

The discussion in this section of this report contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section and those discussed elsewhere in this report.

The Company is primarily engaged in establishing, acquiring, and operating pawnshops which function as convenient sources of consumer credit and as value-oriented specialty retailers of primarily previously owned merchandise. Through its lending function, the Company makes relatively small, non-recourse loans secured by pledges of tangible personal property. The Company contracts for a pawn service charge to compensate it for each pawn loan. Pawn service charges, which generally range from 12% to 300% per annum, are calculated based on the dollar amount and duration of the loan and accounted for approximately 44% of the Company's revenues for the year ended September 30, 1999 ("Fiscal 1999"). In Fiscal 1999, approximately 76% of the loans made by the Company were redeemed in full together with the payment of the pawn service charges or were renewed or extended through the payment of the pawn service charges. In most states in which the Company operates, collateral is held one month with a 60 day extension period after which such collateral is forfeited for resale.

As of December 1, 1999, the Company operated 334 locations: 193 in Texas, 24 in Colorado, 22 in Oklahoma, 21 in Indiana, 17 in Florida, 14 in Georgia, 13 in Alabama, 8 in California, 8 in Tennessee, 4 in Nevada, 3 in Louisiana, 3 in Mississippi, 3 in North Carolina and 1 in Arkansas. The Company intends to expand through the establishment or acquisition of stores primarily in existing markets to form efficient regional clusters in states with regulatory, competitive, and demographic characteristics conducive to successful pawnshop operation.

The pawnshop industry in the United States is a large, highly fragmented, and growing industry. The industry consists of over 10,000 pawnshops owned primarily by independent operators who typically own one to three locations.

The Company is primarily engaged in the business of making pawn loans, which typically are relatively small, non-recourse loans secured by pledges of tangible personal property. As of September 30, 1999, the Company had approximately 770,000 loans outstanding, representing an aggregate principal balance of $53.9 million. The Company contracts for a pawn service charge to compensate it for a pawn loan. A majority of the Company's outstanding pawn loans are in an amount that permits pawn service charges of 20% per month or 240% per annum. For Fiscal 1999, pawn service charges accounted for approximately 44% of the Company's total revenues.

Collateral for the Company's pawn loans consists of tangible personal property, generally jewelry, consumer electronics, tools, and musical instruments. The Company does not investigate the creditworthiness of a borrower, but relies on the estimated resale value of the pledged property, the perceived probability of its redemption, and the estimated time required to sell the item as a basis for its credit decision. The amount that the Company is willing to lend generally ranges from 20% to 65% of the pledged property's estimated resale value depending on an evaluation of these factors. The sources for the Company's determination of the resale value of collateral are numerous and include catalogues, blue books, newspaper advertisements, and previous sales of similar merchandise.

The pledged property is held through the term of the loan, which in Texas is one month with an automatic 60-day grace period, unless repaid or renewed earlier. The Company seeks to maintain a redemption rate between 70% and 80%, and in each of the Company's last three fiscal periods, it achieved this targeted redemption rate. The redemption rate is maintained through loan policy and proper implementation of such policy at the store level. If a borrower does not repay, extend, or renew a loan, the collateral is forfeited to the Company and then becomes inventory available for sale in the Company's pawnshops. The Company does not record loan losses or charge-offs because the principal amount of an unpaid loan and any accrued pawn service charges become the carrying cost of the forfeited collateral, which is recorded as the Company's inventory. The Company evaluates the salability of inventory and provides an allowance for valuation of inventory, based on the type of merchandise, recent sales trends and margins, and the age of merchandise.

The table below shows the dollar amount of loans made, loans repaid, loans forfeited, and loans acquired by the Company for the fiscal years ended September 30, 1997, 1998 and 1999:

The realization of gross profit on sales of inventory primarily depends 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 property for an amount less than the carrying cost of the property. Jewelry, which constitutes approximately 60% of the principal amount of items pledged, can be evaluated primarily based on weight, carat content, and value of gemstones, if any. The other items pawned typically consist of consumer electronics, tools, and musical instruments.

At the time a pawn transaction is made, a pawn loan agreement, commonly referred to as a pawn ticket, is delivered to the borrower. It sets forth, among other things, the name and address of the pawnshop and the borrower, the borrower's identification number from his driver's license, military identification or other official number, the date of the loan, an identification, and description of the pledged goods (including applicable serial numbers), the amount financed, the pawn service charge, the maturity date of the loan, the total amount that must be paid to redeem the pledged goods on the maturity date, and the annual percentage rate.

Of the Company's 334 locations in operation as of December 1, 1999, 193 were stores located in Texas. Accordingly, Texas pawnshop laws govern most of the Company's operations. In Texas, pawnshop operations are regulated by the State of Texas Office of Consumer Credit Commissioner in accordance with Chapter 371 of the Texas Finance Code, commonly known as the Texas Pawnshop Act (the "Pawnshop Act"). See "Regulation".

The maximum allowable pawn service charges for stratified loan amounts made in the State of Texas are set in accordance with Texas law under the Pawnshop Act. Historically, the maximum allowable pawn service charges under Texas law have not changed; however, the stratified loan amounts have been adjusted upward by nominal amounts each year. The maximum allowable pawn service charges under the

Pawnshop Act for the various stratified loan amounts for the year beginning July 1, 1998 and ending June 30, 1999 and for the year beginning July 1, 1999 and ending June 30, 2000, are as follows:

Under Texas law, there is a ceiling on the maximum allowable pawn loan. For the period July 1, 1998 through June 30, 1999, the loan ceiling was $11,500. For the period July 1, 1999 through June 30, 2000, the loan ceiling is $11,750. The Company's average loan amount at the end of Fiscal 1999 was approximately $69.

Retail Activities

Jewelry sales represent approximately 45% of the Company's merchandise sales with the remaining sales consisting primarily of consumer electronics, tools, and musical instruments. The Company believes its ability to offer quality used merchandise at prices significantly lower than original retail prices attracts value-conscious customers. The Company obtains its inventory primarily from unredeemed collateral, and to a lesser extent, from purchases from the general public, and from wholesale sources. For Fiscal 1999, purchases from the general public and from wholesale sources constituted approximately 6% of the dollar value of inflows to inventory. During Fiscal 1999, $119.5 million of merchandise was added to inventory through forfeited collateral. Of such amount, $77.9 million was from the principal amount of unredeemed pawn loans, and $41.6 million was from accrued service charges. For Fiscal 1999, retail activities accounted for approximately 56% of the Company's total revenues, but only 14% of the Company's net revenue, after deducting cost of goods sold on merchandise sales.

Analysis of the sales and inventory data provided by the Company's management information systems facilitates the design of promotional and merchandising programs and merchandise pricing decisions. Regional and area managers develop and implement promotional and merchandising programs, review merchandise pricing decisions, and balance inventory levels within markets.

The Company does not give prospective buyers any warranties on most merchandise sold through its retail operations, except for certain purchases of new, wholesale-purchased merchandise, which may have a limited manufacturer's warranty. Prospective buyers may purchase an item on layaway through the Company's "EZ Layaway" program. Through EZ Layaway, a prospective purchaser will typically put down a minimum of 20% of an item's purchase price as a customer layaway deposit. The Company will hold the item for a 90-day period during which the customer is required to pay for the item in full. As of September 30, 1999, the Company had $2.4 million in customer layaway deposits and related payments.

The Company's overall inventory is stated at the lower of cost or market. The Company provides inventory reserves for shrinkage and cost in excess of market value. The Company estimates these reserves through study and analysis of sales trends, inventory turnover, inventory aging, margins achieved on recent sales, and shrinkage. Valuation allowances, including shrinkage reserves, amounted to $8.3 million as of September 30, 1999. At September 30, 1999, total inventory on hand was $58.2 million, after deducting such allowance for shrinkage and valuation of inventory.

Historically, pawn service charge revenues are highest in the Company's fiscal fourth quarter (July, August, and September) due to higher loan demand during the summer months. Merchandise sales are highest in the Company's first and second fiscal quarters (October through March) due to the holiday season and tax refunds.

The typical Company location is a freestanding building or part of a retail strip center. Nearly all of the Company's pawnshop locations have contiguous parking available. Store interiors are designed to resemble small discount operations and attractively display merchandise by category. Distinctive exterior design and attractive in-store signage provide an appealing atmosphere to customers. The typical store has approximately 1,800 square feet of retail space and approximately 3,200 square feet dedicated to lending activities (principally collateral storage). The Company maintains property and general liability insurance for each of its pawnshops. The Company's stores are open six or seven days a week, depending on location.

A typical Company store employs five to six people consisting of a manager, an assistant manager, and three to four sales and lending representatives. Store managers are specifically responsible for ensuring that their store is run in accordance with the Company's established policies and procedures, and for operating their store according to performance parameters consistent with the Company's store operating guidelines. Each store manager reports to one of approximately 43 area managers who are responsible for the stores within a specific operating region. Area managers are responsible for the performance of all stores within their area and report to one of six regional directors.

The Company has a store level point of sale (POS) system that automates the recording of all store-level transactions. Financial summary data from all stores is retrieved and processed at the corporate office each day and is available for management review by early morning for the preceding day's transactions. This information is available to field management via the Company's internal network. The Company's communications network provides access to each store from the corporate offices.

During 1999, the Company continued the development of a new POS system. This new system will provide additional store level functionality, increase service offerings, enhance reporting, and controls, and provide software, and hardware scalability. The Company plans to conduct an in-store test of this new system in its third fiscal 2000 quarter and, based on the success of this test, install the system chain wide by the end of its first fiscal 2001 quarter. During Fiscal 1999, the Company completed a conversion of its financial and human resource information systems. The Company believes that these systems will provide better tools to manage and control the business.

The Company, like many companies, faces the Year 2000 Issue. This is a result of computer programs being written using two digits rather than four (for example, "99" for 1999) to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things a temporary inability to process transactions or engage in other normal business activities.

The Company's plan to resolve the Year 2000 Issue involved the following four phases: assessment, remediation, testing, and implementation. To date, the Company has fully completed its assessment of all systems that could be affected by the Year 2000. The completed assessment indicated that the only information technology system affected was the Company's store level point of sale system. For this exposure, the Company completed the assessment, remediation, testing, and implementation phases. In addition, the Company has reviewed, and continues to monitor, the Year 2000 preparedness of third parties with which it transacts business. The Company is not aware of any third party with a Year 2000 Issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that all third parties will be Year 2000 ready.

The Company utilized internal resources to reprogram, test, and implement the software and operating equipment for Year 2000 modifications. The total cost of the Year 2000 project was less than $100,000 and was funded by operating cash flows. These costs were expensed as incurred.

The Company's management believes it has effectively resolved the Year 2000 Issue. If unexpected issues arise, the Company may not be able to process customer transactions which could have a material impact on the operations of the Company. In addition, disruptions in the economy generally resulting from Year 2000 issues could also materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. As a contingency plan, the Company has developed and distributed to each of its locations an operating package which would allow each location to operate in a manual environment.

The Company has an internal audit staff of approximately 25 employees to ensure that the Company's policies and procedures are consistently followed. In addition, the audit department carefully monitors, among other matters, the Company's perpetual inventory system, lending practices, and regulatory compliance.

Human Resources

As of September 30, 1999, the Company employed approximately 2,300 people. The Company believes that its profitability is dependent upon its employees' ability to make loans that achieve optimum redemption rates, to sell retail merchandise effectively, and to provide prompt and courteous customer service. The Company seeks to hire people who will become long-term, career employees. To achieve the Company's long-range personnel goals, the Company strives to develop its employees through a combination of classroom training and supervised on-the-job loan and sales training for new employees. Managers attend on-going management skills and operations performance training. Regional directors and area managers receive leadership training to effectively motivate employees to increase each store's profitability. The Company's management believes that its managers, at all levels, are the principal trainers in the organization.

The Company anticipates that store manager candidates will be promoted primarily from the ranks of existing store employees and has created a process for forecasting future needs and identifying potential internal candidates for position openings. The Company's career development plan not only develops and advances employees within the Company, but also provides training for the efficient integration of experienced retail managers and pawnbrokers from outside the Company.

In Texas, each pawnshop employee is required to be licensed in order to make loans or sell merchandise and is required to file for that license within 75 days of the date of hire. The licensing fee is $25 and the licensing process includes a review of the individual's background. Licenses are renewed annually at a fee of $25; renewals also include a review of each individual's background.

The Company currently operates virtually all of its pawnshops under the name "EZ Pawn," which it has registered with the United States Patent and Trademark Office. The Company also uses and has registered the following marks: "E-Z PAWN," "EZCORP," "JEWELRYLAND OUTLET," "EZ MONEY", and "EZ MONEY CENTER."

During Fiscal 1999, the Company established 43 stores, acquired four stores, and closed two stores. The Company plans to slow its expansion and focus on further developing existing markets. The Company seeks to establish clusters of stores in specific geographic regions depending upon individual market demographics. In this manner, the Company expects to achieve certain economies of scale relative to its advertising, name recognition, and managerial and administrative costs.

The five most recently established stores with 12 full months of operating data, opened by the Company through September 30, 1999, required an average gross investment (including inventory, pawn loans, property, plant, and equipment) of approximately $450,000 per pawnshop during the first 12 months of operation.

The Company's ability to add new stores is dependent on several variables, such as the availability of acceptable sites or acquisition candidates, the regulatory environment, and the availability of qualified personnel. The Company's ability to add newly established stores in Texas counties having a population of 250,000 or more has been adversely affected by Texas law which became effective September 1, 1991, which required a finding of public need and probable profitability by the Texas Consumer Credit Commissioner as a condition to the issuance of any new pawnshop license in such counties. Since September 1, 1991, the Company has opened or acquired 73 locations in Texas counties having a population of less than 250,000. Effective September 1, 1999, applicable Texas law was amended to provide that, in counties with 250,000 or more residents, applications for new licenses will be approved only at proposed locations which are not less than two miles from another licensed pawnshop and applications to relocate a licensed pawnshop will be approved only for proposed locations which are not less than one mile from another licensed pawnshop. Additionally, any store may relocate to within one mile of its present location, regardless of the existence of other pawnshops. The Company's ability to add newly established stores in such counties may be adversely affected by such regulation. See "Regulation".

The Company encounters significant competition in connection with the operation of its business. These competitive conditions may adversely affect the Company's revenues, profitability, and its ability to expand. In connection with the lending of money, the Company competes primarily with other pawnshops. The majority of the Company's competitors are independently owned pawnshops. The Company is the second largest publicly held chain of pawnshops in the United States. The Company believes that the primary elements of competition in the pawnshop business are store location and design, the ability to loan competitive amounts on items pawned, management of store-level employees, and the quality of customer service. In addition, as the pawnshop industry consolidates, the Company believes that the ability to compete effectively will be based increasingly on strong general management, regional market focus, automated management information systems, and access to capital. Some of the Company's competitors may have greater financial resources than the Company.

To a certain extent, the Company also competes with other types of financial institutions such as consumer finance companies and companies making what are referred to as payday loans. Other lenders may and do lend money on an unsecured basis, at interest rates which are lower than the service charges of the Company, and on other terms more favorable than those offered by the Company.

The Company's competitors, in connection with the sale of merchandise, include numerous retail and wholesale stores, including jewelry stores, discount retail stores, consumer electronics stores, other pawnshops, other retailers of previously owned merchandise, electronic commerce retailers, and auction sites. Competitive factors in the Company's retail operations include the ability to provide the customer with a variety of merchandise at an exceptional value. On a retail level, the Company competes with numerous other retailers who have significantly greater financial resources than the Company.

The Company's pawnshop operations are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, ordinances, and regulations. Of the Company's 334 locations as of December 1, 1999, 193 were in Texas. Accordingly, Texas pawnshop laws govern most of the Company's operations. The laws of Colorado, Oklahoma, Indiana, Florida, Georgia, Alabama, California, Tennessee, Nevada, Louisiana, Mississippi, North Carolina, and Arkansas apply to the Company's pawnshop operations in those states. At December 1, 1999, the Company operated 334 locations: 193 in Texas, 24 in Colorado, 22 in Oklahoma, 21 in Indiana, 17 in Florida, 14 in Georgia, 13 in Alabama, 8 in California, 8 in Tennessee, 4 in Nevada, 3 in Louisiana, 3 in Mississippi, 3 in North Carolina, and 1 in Arkansas. In the states in which the Company operates other than Texas, Oklahoma, and Alabama, pawnshops are subject to local regulation at the municipal and county level, which regulation may affect the ability of the Company to expand its operations in those states.

In Texas, pawnshops are governed by the Texas Pawnshop Act and the Rules of Operation promulgated thereunder, and are subject to licensing by and supervision of the State of Texas Office of Consumer Credit Commissioner. In addition, pawnshops and pawnshop employees in Texas are required to be licensed by the Texas Consumer Credit Commissioner. Furthermore, the Company is required to supply the Texas Consumer Credit Commissioner with copies of information filed with the Securities and Exchange Commission.

The maximum allowable pawn service charges for stratified loan amounts made in the State of Texas are set in accordance with the Texas Pawnshop Act. Historically, the maximum allowable pawn service charges under Texas law have not changed; however, the stratified loan amounts have been adjusted upward by nominal amounts each year. Under Texas law, there is a ceiling on the maximum allowable pawn loan. From July 1, 1998 to June 30, 1999, the loan ceiling was $11,500. For the period July 1, 1999 through June 30, 2000, the loan ceiling is $11,750. A table of the maximum allowable pawn service charges under the Texas Pawnshop Act for the various stratified loan amounts for July 1, 1998 to June 30, 1999 is presented in "Lending Activities".

To be eligible for a license to operate a pawnshop in Texas, an applicant must: (i) be of good moral character, which in the case of a business entity applies to each officer, director, and holder of five percent or more of the entity's outstanding shares; (ii) have net unencumbered assets (as defined in the Texas Pawnshop Act) of at least $150,000 readily available for use in conducting the business of each licensed pawnshop; (iii) demonstrate that the applicant has the financial responsibility, experience, character, and general fitness to command the confidence of the public in its operation; and (iv) demonstrate that the pawnshop will be operated lawfully and fairly in accordance with the Texas Pawnshop Act. Current applications to the Texas Consumer Credit Commissioner inquire, among other matters, into the applicant's credit history and criminal record.

In addition, for applications filed between September 1, 1991 and September 1, 1999, the Texas Pawnshop Act requires the Texas Consumer Credit Commissioner to make a determination of public need and probable profitability, in counties with a population of 250,000 or more, for a new pawnshop license, or for a relocation of a pawnshop more than one mile away from the existing address. The determination of public need and probable profitability may be made administratively by the Commissioner; however, if a public hearing is requested by the Commissioner or by any pawnshop licensee that would be affected by the granting of the proposed application, the determination of public need and probable profitability must be made in a public hearing with notice and opportunity for all affected parties to participate. For a new license application in any Texas county, the Commissioner provides notice of the application, and the opportunity for a public hearing, to the other licensed pawnshops in the county in which the applicant proposes to operate. The timeframe for the license application approval process generally requires the Commissioner's office to process an application within 60 days of its receipt of a complete application file. When a public hearing is requested, however, the public hearing process can increase the timeframe substantially or result in no application approval at all. The Company's ability to add newly established stores, particularly in Texas counties having a population of 250,000 or more where public need and probable profitability must be shown, has been adversely affected by the referenced provisions of the Texas Pawnshop Act. The Company's ability to add newly established stores in such counties may be adversely affected by such regulation. Effective September 1, 1999, applicable Texas law was amended to provide that, in counties with 250,000 or more people, applications for new licenses will be approved only at proposed locations which are not less than two miles from another licensed pawnshop, and applications to relocate a license will be approved only for proposed locations which are not less than one mile from another licensed pawnshop. Additionally, any store may relocate to within one mile of its present location, regardless of the existence of other pawnshops. The Company's ability to add newly established stores in such counties may be adversely affected by such regulation.

The Texas Consumer Credit Commission may, after notice and hearing, suspend or revoke any license for a Texas pawnshop upon finding, among other matters, that: (i) any fees or charges have not been paid; (ii) the licensee has violated (whether knowingly or unknowingly without due care) any provisions of the Texas Pawnshop Act or any regulation or order thereunder; or (iii) any fact or condition exists which, if it had existed at the time the original application was filed for a license, would have justified the Commissioner in refusing such license.

The Texas Pawnshop Act also contains rules about the operation of pawnshops which regulate the day-to-day management of the Company's pawnshops. Under the Pawnshop Act and such rules of operation, a pawnbroker may not do any of the following: accept a pledge from a person under the age of 18 years; make any agreement requiring the personal liability of the borrower; accept any waiver of any right or protection accorded to a pledgor under the Texas Pawnshop Act; fail to exercise reasonable care to protect pledged goods from loss or damage; fail to return pledged goods to a pledgor upon payment of the full amount due; make any charge for insurance in connection with a pawn transaction; enter into any pawn transaction that has a maturity date of more than one month; display for sale in storefront windows or sidewalk display cases, pistols, swords, canes, blackjacks or similar weapons; or purchase used or second hand personal property unless a record is established containing the name, address, and identification of the seller, a complete description of the property, including serial number, and a signed statement that the seller has the right to sell the property.

Colorado law provides for the licensing and bonding of pawnbrokers in that state. It also requires that pawn transactions be reported to local authorities and that certain bookkeeping records be maintained. Under Colorado law, the maximum allowable pawn service charge is 240% annually for pawn loans up to $50, and 120% annually for pawn loans in excess of $50.

The Company's Oklahoma operations are subject to the Oklahoma Pawnshop Act. Following substantially the same statutory scheme as the Texas Pawnshop Act, the Oklahoma Pawnshop Act provides for, among other matters, the licensing and bonding of pawnbrokers in Oklahoma and provides for the Oklahoma Administrator of Consumer Credit to investigate the general fitness of the applicant and generally regulate pawnshops in that state. The Administrator has broad rule-making authority with respect to Oklahoma pawnshops.

In general, the Oklahoma Pawnshop Act prescribes stratified loan amounts and maximum rates of service charges which pawnbrokers in Oklahoma may charge for lending money in Oklahoma within each stratified range of loan amounts. The regulations provide for a graduated rate structure, similar to the graduated rate structure utilized in federal income tax computations. Under this method of calculation, a $500 loan, for example, earns interest as follows: (1) first $150 at 240% annually, (2) next $100 at 180% annually, and (3) the remaining $250 at 120% annually. The maximum allowable pawn service charges for the various stratified loan amounts under the Oklahoma statute are as follows:

The amount financed in Oklahoma may not exceed $25,000 per pawn transaction. In addition, the Oklahoma Pawnshop Act requires each applicant to (1) be of good moral character; (2) have net assets of at least $25,000; (3) show that the pawnshop will be operated lawfully and fairly within the purpose of the Oklahoma Pawnshop Act; and (4) not have been convicted of any felony which directly relates to the duties and responsibilities of the occupation of pawnbroker.

The Company's Indiana operations are regulated by the Department of Financial Institutions. The Department requires all persons or entities to obtain a license to act as a pawnbroker. The Indiana Pawnbroker's Act provides for the Department of Financial Institutions to investigate the general fitness of the applicant, to determine whether the convenience and needs of the public will be served by granting an applicant a license, and generally to regulate pawnshops in the state.

The Department of Financial Institutions has broad investigatory and enforcement authority under the statute. The Department may grant, revoke, and suspend licenses. For compliance purposes, pawnshops are required to keep such books, accounts, and records as will enable the Department to determine if the pawnshop is complying with the statute. Each pawnshop is required to give authorized agents of the Department of Financial Institutions free access to its books and accounts for these purposes. The Indiana statute allows the following annual rates of interest plus pawn service charges: 276% annually on transactions of $300 or less; 261% annually on transactions greater than $300, but not exceeding $1,000; and 255% annually on transactions greater than $1,000.

Pawnshop transactions in Florida are subject to Florida regulations codified in Chapter 539 of the Florida Statutes. Under such regulations, licensing of pawnshops and regulatory enforcement of such shops is performed by the Division of Consumer Services of the Department of Agriculture and Consumer Services. Such regulations require, among other things, that the pawnshop fill out a Pawnbroker Transaction Form showing the customer name, type of item pawned, and disclosing the amount of the pawn loan and the applicable finance charges. A copy of each form must be delivered to local law enforcement officials at the end of each business day.

Pawn loans in Florida typically have a 30 day maturity date. If the customer does not redeem the loan within 30 days following the maturity date (or the next business day, whichever is later), all right, title, and interest to the property vests in the pawnbroker. The pawnbroker is entitled to charge two percent of the amount financed for each 30 days as interest, and an additional amount as pawn service charges, provided the total amount of such charge, inclusive of interest, does not exceed 25% of the amount financed for each 30 day period in a pawn transaction. The pawnbroker may charge a minimum pawn service charge of $5.00 for each 30 day period. Pawns may be extended by agreement, with the charge applicable being one-thirtieth of the original total pawn service charge for each day by which the loan is extended. For loans redeemed greater than 60 days after the date made, pawn service charges continue to accrue at the daily rate of one-thirtieth of the original total pawn service charge.

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, and allows duly authorized officers to inspect such records. Under applicable Georgia statutes, 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 the pawnshop customers.

Georgia law establishes a maximum allowable rate of interest and service charge of 25% of the principal amount of a pawn transaction for each 30 days. This annual rate is in effect for the first 90 days of any pawn transaction or extension or continuation thereof. The maximum allowable charge for interest and service charges is reduced to 12.5% for each 30 day period thereafter. Georgia law requires a grace period after default on a pawn transaction. During the grace period, the pawnbroker may not sell the pledged item. The grace period is 30 days for motor vehicles and 10 days for all other pawn collateral.

The Alabama Pawnshop Act regulates the licensing and operation 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 also issues pawnshop licenses. The Alabama Pawnshop Act requires that certain bookkeeping records be maintained and made available to the Supervisor and to local law enforcement authorities. The Alabama Pawnshop Act establishes a maximum allowable pawn service charge of 300% annually.

In California, both state and city or county licenses are required. Applicants must pass a state and local background check, post a bond in the amount of $20,000, and maintain net assets of at least $100,000 per location. Pawn loans in California require a written contract, which must provide for a four month loan period. If the pledgor does not redeem the loan within such period, the pawnbroker must, within 30 days thereafter, send a notification to the pledgor giving him ten days from the date of the mailing to redeem the pawn. The pawnbroker may charge up to $2 for this notice.

Applicable Tennessee law provides that pawnbrokers may charge interest of 2% per month, plus service charges of 20% or one-fifth of the amount of the loan for investigating the title, storing, and insuring the pledged goods, closing the loan, and for other expenses and losses associated with the loan.

In Nevada, all pawn loans must be held for redemption for at least 120 days after the date the loan is made. A pawnbroker may charge interest at the rate of 10% per month for money loaned on the security of personal property actually received. In addition, the pawnbroker may collect an initial set up fee of $5. Property received in pledge may not be removed from the pawnshop, except when redeemed by the owner, prior to 30 days after a report of the receipt of such property is reported to the sheriff or chief of police.

The Company's Louisiana operations are governed by the Louisiana Pawnshop Act. The statute gives regulatory and enforcement powers to the Commissioner of the Office of Financial Institutions within the Department of Economic Development. This statute provides for, among other things, the licensing and bonding of all pawnbrokers in Louisiana.

Under Louisiana law, the maximum allowable interest charge is 120% annually. In addition, pawnshops may collect a 10% service charge for the first month of a pawn transaction. Louisiana law requires that a pawnbroker hold jewelry that is pledged as collateral until the lapse of six months prior to resale from the time the loan was entered or extended. The law requires a three-month lapse on other items.

The Company's Mississippi operations are subject to the Mississippi Pawnshop Act. The Mississippi Pawnshop Act is administered by the Commissioner of Banking. Municipalities in the state may enact ordinances which are in compliance with, but not more restrictive than those in the Mississippi Pawnshop Act.

The Mississippi Pawnshop Act provides for, among other matters, the licensing of pawnbrokers. The Act also provides for the Commissioner of Banking to investigate the general fitness of the applicant and generally to regulate pawnshops in the state. The Commissioner has broad rule-making authority with respect to Mississippi pawnshops. The Mississippi Pawnshop Act establishes a maximum allowable pawn service charge of 300% annually.

In North Carolina, a pawnbroker must obtain a license by showing sufficient net assets and moral character to demonstrate that it will not operate to the detriment of the public. The applicable interest and service charges are two percent per month interest, and a monthly fee not to exceed 20% for the following: (1) title investigation, (2) handling, appraisal and storage, (3) insuring and security, (4) application fee, (5) making daily reports to law enforcement or other services. The total monthly fees may not exceed $100 in the first month, $75 in the second month, $75 in the third month, $50 in the fourth month, and for any subsequent months. Pawn loans in North Carolina are to have a 30 day loan term, with a 60 day grace period, after which time the collateral is subject to resale by the pawnbroker.

Arkansas law does not provide for the licensing of pawnbrokers or pawnshops in that state. By statute, pawnbrokers must maintain certain records of each pawn transaction and make those records available to local law enforcement agencies. Arkansas law establishes a maximum allowable interest rate of 17% annually; however, a pawnshop operator may charge reasonable fees for investigating title, storage, and other services.

Local Regulations

At the local level, each pawnshop, voluntarily or pursuant to municipal ordinance, provides copies of transactions involving pawn loans and over-the-counter purchases to the local police department. 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 names and addresses of the owners obtained from valid identification cards.

A copy of each transaction ticket is provided to local law enforcement agencies for processing by the National Crime Investigative Computer to determine rightful ownership. Goods held to secure pawn loans or goods purchased which are determined to belong to an owner other than the borrower or seller are subject to recovery by the rightful owner. While a risk exists that pledged or purchased merchandise may be subject to claims of rightful owners, historically, the Company has experienced such claims with respect to less than 0.5% of pawn loans made.

There can be no assurance that additional local, state, or federal legislation will not be enacted or that existing laws and regulations will not be amended which would materially, adversely impact the Company's operations and financial condition.

With respect to gun sales, each pawnshop that sells firearms must comply with the regulations promulgated by the Federal Bureau of Alcohol, Tobacco, and Firearms (BATF) which require each pawnshop dealing in guns to maintain a permanent written record of all transactions involving the receipt or disposition of guns.

The BATF promulgated rules under the Brady Handgun Violence Prevention Act (the "Brady Act") on February 28, 1994. The rules, in effect until November 30, 1998, basically required that all licensees, in either selling inventoried firearms or releasing pawned firearms to people other than the original pledgor, have the buyer complete appropriate forms, and wait the requisite five-day period prior to completing the sale and delivering the firearm. On November 30, 1998, the permanent provisions of the Brady Act took effect. From that date, all purchases of firearms and all people redeeming pledged firearm property must complete a background check before the transfer of the firearm can be completed.

The Company complies with the Brady Act, and rules promulgated by the United States Department of the Treasury relating thereto. The Company does not believe that compliance with the Brady Act and the new rules promulgated thereunder have materially affected the Company's operations. There can be no assurance, however, that compliance with the Brady Act will not adversely affect the Company's operations.

As of December 1, 1999, the Company owned the real estate and buildings for 39 of its pawnshops and leased 295 of its operating pawnshop locations. The Company generally leases facilities for a term of five to ten years with one or more options to renew. The Company's existing leases expire on dates ranging between January 1, 2000 and December 31, 2019. All leases provide for specified periodic rental payments and such leases provide for market rental rates. Most leases require the Company to maintain the property and pay the cost of insurance and taxes. The Company believes that the termination of a particular lease would not have a material adverse effect on the Company's operations. The Company's strategy is generally to lease, rather than acquire, space for its pawnshop locations unless the Company finds what it believes is a superior location at an attractive price. The Company believes that the facilities owned and leased by it as pawnshop locations are suitable for such purpose.

The following table presents the metropolitan areas or regions (as defined by the Company) generally served by the Company and the number of retail locations serving each such market as of December 1, 1999:

In addition to its store locations, the Company owns its 27,400 square foot corporate offices located in Austin, Texas and leases certain warehouse facilities. The Company also leases approximately 8,100 square feet for its Central Jewelry Processing Center under a five-year lease agreement with one five-year option to renew.

From time to time, the Company is involved in litigation relating to claims arising from its normal business operations. Currently, the Company is a defendant in several lawsuits. Some of these lawsuits involve claims for substantial amounts. While the ultimate outcome of these lawsuits cannot be ascertained, after consultation with counsel, the Company believes the resolution of these suits will not have a material adverse effect on the Company's financial condition. There can be no assurance, however, that this will be the case.

Pursuant to a settlement agreement dated February 4, 1998, the Company and its founder and former President and Chief Executive Officer, Courtland L. Logue, Jr., reached an out of court settlement in the lawsuit styled EZCORP, Inc. v. Courtland L. Logue, Jr., in the 201st District Court of Travis County, Texas. Under the terms of the settlement, which closed February 18, 1998, both the Company and Mr. Logue released their claims against each other, including all claims under Mr. Logue's employment agreement, and neither party admitted any liability nor paid any cash consideration to the other.

The Company agreed to accelerate the release of contractual restrictions on the transfer of Mr. Logue's 967,742 shares of common stock, which converted, as of February 18, 1998, to publicly traded Class A Non-voting Common Stock. In exchange, Mr. Logue agreed to assign 10,000 shares of his stock to the Company.

The settlement released 191,548 shares immediately from certain restrictions against transfer, and a like amount was released as of October 29, 1998. An additional 95,774 shares will be released from restrictions on each of October 29, 1999 and October 29, 2000, with the remaining 40% of the shares to be released in July 2001, as originally scheduled. The Company and Mr. Logue also clarified the scope of Mr. Logue's continuing non-competition agreement, agreed to a five-year limitation on Mr. Logue's financial investments in competing pawnshop businesses and agreed to renewal options with respect to certain existing real estate leases for store locations.

Fiscal 1999, the Company was the nominal defendant in a lawsuit filed July 18, 1997 by a holder of 39 shares of Company stock styled for the benefit of the Company against certain directors of the Company in the Castle County Court of Chancery in the State of Delaware. The suit alleged that the defendants breached their fiduciary duties to the Company in approving certain management incentive compensation arrangements and an affiliate's financial advisory services contract with the Company. The suit sought rescission of the subject agreements, unspecified damages and expenses, including plaintiff's legal fees. On December 16, 1998, the plaintiff filed a Stipulation and Order of Dismissal with the Court, stipulating that the lawsuit would be dismissed with prejudice to the plaintiff. The court approved the Stipulation and Order of Dismissal on December 18, 1998, thereby dismissing the lawsuit.

None.

Since August 27, 1991, the Company's Class A Non-voting Common Stock ("Class A Common Stock") has traded on The Nasdaq Stock Market under the symbol EZPW. As of December 1, 1999, there were 217 stockholders of record of the Company's Class A Non-voting Common Stock. There is no trading market for the Company's Class B Voting Common Stock ("Class B Common Stock"), and as of December 1, 1999, such stock was held by one stockholder of record.

The high and low per share price for the Company's Class A Common Stock for the past two fiscal years, as reported by The Nasdaq Stock Market, were as follows:

As of December 1, 1999, the Company's Class A Common Stock closed at $3.81 per share.

The Company's restated certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid share and share alike on the Class A Common Stock and the Class B Common Stock. On July 27, 1998, the Board of Directors approved an annual cash dividend of $0.05 per share payable quarterly on both the Class A Common Stock and the Class B Common Stock.

The following selected financial information should be read in conjunction with, and is qualified in its entirety by reference to the financial statements of the Company and the notes thereto included elsewhere in this Form 10-K:

(1) Sales from scrap and wholesale activities were reclassified from cost of goods sold to sales in the 1995 operating data.

This discussion and analysis compares the results of operations for the 12 month periods ending September 30, 1999, 1998, and 1997 (designated as "Fiscal 1999", "Fiscal 1998", and "Fiscal 1997"). The discussion should be read in conjunction with, and is qualified in its entirety by, the accompanying financial statements and related notes.

______________

(1) Average locations in operation during the period is calculated based on the average of the stores operating at the beginning and end of such period.

The Company's primary activity is the making of small, non-recourse loans secured by tangible personal property. The income earned on this activity is pawn service charge revenue. For Fiscal 1999, pawn service charge revenue increased $16.8 million from Fiscal 1998 to $101.9 million as a result of an increase in same store pawn service charge revenue ($10.8 million) and pawn service charge revenue from new stores not opened the full 12 month period ($6.0 million). At September 30, 1999, same store pawn loan balances were 3% above September 30, 1998 and the annualized yield for all stores increased by one percentage point to 208%.

For Fiscal 1998, pawn service charge revenue increased $6.2 million from Fiscal 1997 to $85.1 million as a result of an increase in same store pawn service charge revenue ($3.5 million) and pawn service charge revenue from new stores not open the full 12 month period ($2.8 million), reduced by stores which were closed ($0.1 million). At September 30, 1998, same store pawn loan balances were 9% above September 30, 1997 and the annualized yield for all stores decreased by four percentage points to 207% primarily as a result of a mix shift to lower yielding loans.

A secondary, but related, activity of the Company is the sale of merchandise, primarily collateral forfeited from its lending activity. For Fiscal 1999, merchandise sales increased approximately $17.8 million from Fiscal 1998 to $130.1 million. Increases in same store merchandise sales ($6.7 million), new stores sales ($10.6 million), wholesale jewelry sales ($0.3 million), and other revenues ($0.6 million) were offset by merchandise sales of the closed stores ($0.4 million). Same store sales for Fiscal 1999 increased 6.1% from Fiscal 1998.

For Fiscal 1998, merchandise sales increased approximately $10.9 million from Fiscal 1997 to $112.3 million. An increase in same store merchandise sales ($7.8 million), and new store sales ($3.8 million) were offset by merchandise sales of the closed stores ($0.2 million), and a decrease in wholesale jewelry sales ($0.5 million). Same store merchandise sales were up 8% compared to Fiscal 1997.

The Company's gross margin level (gross profit as a percentage of merchandise sales) results from, among other factors, the composition, quality, and age of its inventory. At September 30, 1999, 1998 and 1997, the Company's inventories consisted of approximately 62%, 60%, and 63% jewelry (e.g., ladies' and men's rings, chains, bracelets, etc.) and 38%, 40%, and 37% general merchandise (e.g., televisions, VCRs, tools, sporting goods, musical instruments, etc.). At September 30, 1999, 1998 and 1997, approximately 87%, 88%, and 87% of the jewelry inventory was less than 12 months old based on the Company's date of acquisition (date of forfeiture for collateral or date of purchase) as was approximately 94%, 96%, and 96% of the general merchandise inventory.

For Fiscal 1999, gross margins decreased 3.7% percentage points from Fiscal 1998 to 12.5%. Of the total decrease, 3.2 percentage points were attributable to a decline in margins on merchandise sales and 0.5 of a percentage point were attributable to an increase in inventory shrinkage. During 1999, the Company reduced its merchandise pricing and loan guidelines in response to a reduction in competitive retail prices, primarily in jewelry and electronics. As a result of the impact these market changes had on the business, the Company increased its inventory valuation reserve by $1.5 million, with a corresponding net charge to cost of goods sold, accounting for 1.1 percentage points of the 3.2 percentage point decrease in gross margins on merchandise sales. The remaining 2.1 percentage point decrease in gross margins on merchandise sales was largely the result of the retail price reductions. In addition, an increase of 0.5 of a percentage point in inventory shrinkage when measured as a percent of merchandise sales, increasing inventory shrinkage to 1.8%, further contributed to the lower total gross margin. The Company believes that higher employee turnover in some of its markets may have contributed to the higher inventory shrinkage.

As a result of the reduction in competitive prices discussed above, the Company's loan customers changed their perceived value of collateral relative to the Company's loan amount. The result on the Company's business was a decline in loan redemption rates from 78% in Fiscal 1997 and Fiscal 1998 to 76% in Fiscal 1999. This decrease in redemption rate coupled with loan growth contributed to an increase in inventory created through loan forfeitures that exceeded merchandise sales growth. Consequently, per store inventory levels increased to $176,000 in Fiscal 1999 from $154,000 in Fiscal 1998. The Company's reaction to these market changes and inventory growth was to reduce its loan amount and retail prices on certain categories of merchandise. The Company believes that these changes will slow loan growth and reduce gross margins on merchandise sales in future periods relative to the prior year period.

For Fiscal 1998, gross margins decreased 0.5 of a percentage point from Fiscal 1997 to 16.2% as a result of a decline in margins on merchandise sales (1.1 percentage points), a reduction in inventory shrinkage when measured as a percentage of merchandise sales (down 0.1 of a percentage point to approximately 1.3%), and improved gross profit on wholesale and scrap jewelry sales (an increase of 0.5 of a percentage point).

In Fiscal 1999, operating expenses as a percent of total revenues increased 1.5 percentage points from Fiscal 1998 to 35.3%, primarily as a result of new store openings. Exclusive of stores opened in the past two years, operating expenses decreased from 33.8% in Fiscal 1998 to 32.6% of total revenues in Fiscal 1999. Newer stores generally have a higher level of operating expense relative to revenues than do mature stores. Administrative expenses decreased 0.2 of a percentage point from Fiscal 1998 to 6.3% primarily as a result of the economies realized from the 17.5% total revenue increase.

In Fiscal 1998, operating expenses as a percentage of total revenues increased 0.1 of a percentage point from Fiscal 1997 to 33.8% primarily as a result of increased new store openings. Administrative expenses decreased 0.9 of a percentage point from Fiscal 1997 to 6.5% primarily as a result of the economies realized from 9.5% revenue growth and a reduction in management bonuses earned in Fiscal 1998 compared to Fiscal 1997.

Depreciation and amortization expense, when measured as a percent of total revenue, increased to 4.1% in Fiscal 1999 from 3.8% in Fiscal 1998. The increase is a net effect of greater revenues and an increase in depreciation and amortization expense. Depreciation and amortization expense increased primarily due to investments made in new stores, and the Company's information systems. In Fiscal 1998, depreciation and amortization expense declined to 3.8% from 4.2% in Fiscal 1997. The decline was a combined effect of greater revenues and an absolute decline in depreciation and amortization, as the impact of assets becoming fully depreciated during the year outweighed the impact of asset additions.

In Fiscal 1999, interest expense increased $2.3 million to $3.7 million. In Fiscal 1998, interest expense increased to $1.4 million from $1.0 million in Fiscal 1997. The increased interest expense in each year was due largely to increased average debt balances resulting from additional borrowings to fund new store expansion.

Income tax expense for Fiscal 1999 was $3.2 million (37% of pretax income) compared to $5.6 million (38% of pretax income) for Fiscal 1998 and $4.7 million (36% of pretax income) for Fiscal 1997. The effective tax rate variances were due to changes in effective state income taxes in some states in which the Company operates.

Net income for Fiscal 1999 was $5.5 million compared to net income of $9.2 million for Fiscal 1998. The decrease in net income results primarily from lower gross margins on merchandise sales, and higher operating and interest expenses. Net income for Fiscal 1998 was $9.2 million compared to net income of $8.4 million for Fiscal 1997. The improvement in net income resulted primarily from higher pawn service charge revenues and increased gross profit from merchandise sales, partially offset by higher operating costs.

The Year 2000 Issue

The Company, like many companies, faces the Year 2000 Issue. This is a result of computer programs being written using two digits rather than four (for example, "99" for 1999) to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things a temporary inability to process transactions or engage in similar normal business activities.

The Company's plan to resolve the Year 2000 Issue involved the following four phases: assessment, remediation, testing, and implementation. To date, the Company has fully completed its assessment of all systems that could be affected by the Year 2000. The completed assessment indicated that the only information technology system affected was the Company's store level point of sale system. For this exposure, the Company has completed the assessment, remediation, testing, and implementation phases. In addition, the Company has reviewed and continues to monitor the Year 2000 preparedness of third parties with which it transacts business. The Company is not aware of any third party with a Year 2000 Issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that all third parties will be Year 2000 ready.

The company utilized internal resources to reprogram, test, and implement the software and operating equipment for Year 2000 modifications. The total cost of the Year 2000 project was less than $100,000 and was funded by operating cash flows. These costs were expensed as incurred.

The Company's management believes it has effectively resolved the Year 2000 Issue. If unexpected issues arise, the Company may not be able to process customer transactions which could have a material impact on the operations of the Company. In addition, disruptions in the economy generally resulting from Year 2000 issues could also materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. As a contingency plan, the Company has developed and distributed to each of its locations an operating package which would allow each location to operate in a manual environment.

Net cash provided by operating activities in Fiscal 1999 declined to $0.6 million compared to $10.8 million provided in Fiscal 1998, primarily due to a $14.1 million increase in the Company's inventory, partially offset by smaller changes in other working capital accounts. Net cash provided by operating activities in Fiscal 1998 was $10.8 million compared to $10.4 million provided in Fiscal 1997. Improved operating results offset by increases in inventories and pawn service charges receivable were the main factors for the increased cash provided by operating activities.

In Fiscal 1999, the Company invested $4.0 million in pawn loans, $25.8 million in property, plant, and equipment, primarily for new stores, $1.8 million in Albemarle and Bond Holdings plc, an unconsolidated affiliate of the Company, and $1.8 million to acquire four pawn stores. These investments, the payment of $0.6 million in dividends, and a $1.6 million increase in cash balances were funded by a net $35.0 million increase in bank borrowings and the $0.6 million provided by operating activities.

The Company plans to slow its store expansion in fiscal 2000 and open approximately 10 new stores. During fiscal 2000, the Company plans to complete a sale-leaseback transaction of some of its owned properties. The Company anticipates that cash flow from operations, funds available under its existing bank line of credit, and proceeds from the sale-leaseback transaction will be adequate to fund planned capital expenditures and working capital requirements during the coming year. However, there can be no assurance that the Company's planned sale/leaseback transaction will be completed or that the Company's cash flow from operating activities, and funds available under the line of credit will be adequate for these expenditures.

On December 10, 1998, the company completed a new $110 million syndicated credit facility and amended this facility (the "First Amendment") on September 29, 1999. The First Amendment increased the leverage ratio covenant for the fiscal quarters ending September 30, 1999 and December 31, 1999 and provided for a decrease in the fixed charge coverage covenant in the quarter that the planned sale-leaseback transaction is completed and the following quarter. The new credit facility as amended is unsecured and matures December 3, 2001. Terms of the credit agreement require, among other things, that the Company meet certain financial covenants. The outstanding balance under the facility bears interest, payable monthly, at the agent bank's Prime Rate or Eurodollar rate plus 87.5 to 175 basis points, depending on certain performance criteria. In addition, the Company pays an unused commitment fee equal to a fixed rate of 25 basis points of the unused amount of the total commitment. At December 1, 1999, the Company had $85 million outstanding on the line of credit.

Historically, pawn service charge revenues are highest in the Company's fiscal fourth quarter (July, August, and September) due to higher loan demand during the summer months and merchandise sales are highest in the Company's first and second fiscal quarters (October through March) due to the holiday season and tax refunds.

This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical information provided herein are forward-looking and may contain information about financial results, economic conditions, trends, and known uncertainties. The Company cautions the reader that actual results could differ materially from those expected by the Company depending on the outcome of certain factors, including without limitation (i) fluctuations in the Company's inventory and loan balances, inventory turnover, average yields on loan portfolios, redemption rates, labor and employment matters, competition, operating risk, acquisition, and expansion risk, liquidity, and capital requirements and the effect of government and environmental regulations, and (ii) adverse changes in the market for the Company's services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligations to release publicly the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereon, including without limitation, changes in the Company's business strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

The following discussion about the Company's market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The Company is exposed to market risk related to changes in interest rates and foreign currency exchange rates. The Company does not use derivative financial instruments.

The Company's earnings are affected by changes in interest rates due to the impact those changes have on its variable-rate debt instruments. The majority of the Company's long-term debt at September 30, 1999 is comprised of variable-rate debt instruments. If interest rates average 25 basis points more in 2000 than they did in 1999, the Company's annual interest expense would be increased by approximately $210,000. These amounts are determined by considering the impact of the hypothetical interest rates on the Company's variable-rate long-term debt at September 30, 1999.

The Company's earnings and financial position are affected by foreign exchange rate fluctuations related to the equity investment in Albemarle & Bond Holdings, plc ("A&B"). A&B's functional currency is the U.K. pound. The U.K. pound exchange rate can directly and indirectly impact the Company's results of operations and financial position in several ways, including potential economic recession in the U.K. resulting from a devalued pound. The impact on the Company's financial position and results of operations of a hypothetical change in the exchange rate between the U.S. dollar and the U.K. pound cannot be reasonably estimated. The translation adjustment representing the strengthening in the U.K. pound during Fiscal 1999 was approximately $174,000. On December 1, 1999, the U.K. pound closed at 0.6253 to 1.00 U.S. dollar, an increase from 0.6076 at September 30, 1999. No assurance can be given as to the future valuation of the U.K. pound and how further movements in the pound could effect future earnings or the financial position of the Company.

Report of Independent Auditors

Board of Directors

EZCORP, Inc.

We have audited the accompanying consolidated balance sheets of EZCORP, Inc. and its subsidiaries as of September 30, 1998 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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 consolidated financial position of EZCORP, Inc. and its subsidiaries at September 30, 1998 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1999, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Austin, Texas

November 12, 1999

Consolidated Balance Sheets

Note A: Organization and Summary of Significant Accounting Policies

Organization: The Company is primarily engaged in establishing, acquiring, and operating pawnshops. As of September 30, 1999, the Company operated 331 locations in 14 states. The pawnshops function as sources of customer credit and as specialty retailers primarily of previously owned merchandise.

Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its 29.86% interest in Albemarle & Bond Holdings, plc ("A&B") using the equity method.

Revenue Recognition: Pawn loans ("loans") are generally made on the pledge of tangible personal property for one month with an automatic 60 day grace period (the "loan term"). Pawn service charges on loans are recorded based on the interest method. If the loan is not repaid, the forfeited collateral (inventory) is valued at the lower of cost (principal plus accrued interest) or market (net realizable value) of the property. When this inventory is sold, sales revenue and the related cost are recorded at the time of sale.

Concentrations of Credit Risk: Collateral for the Company's pawn loans consists of tangible personal property, generally jewelry, consumer electronics, tools, and musical instruments. The Company does not investigate the creditworthiness of a borrower, but relies on the estimated resale value of the pledged property, the perceived probability of its redemption, and the estimated time required to sell the item as a basis for its credit decision. As a result, the Company believes it has very little credit risk.

Cash and Cash Equivalents: The Company considers investments with maturities of 90 days or less when purchased to be cash equivalents.

Inventory: Inventory is stated at the lower of cost (specific identification) or market (net realizable value). Inventory consists of merchandise acquired from forfeited loans, merchandise purchased from customers, merchandise acquired from the acquisition of other pawnshops, and new merchandise purchased from vendors. The Company provides an allowance for shrinkage and valuation based on management's evaluation of the age, condition, and salability of the merchandise. The valuation allowance deducted from the carrying value of inventory amounted to $6,817,000 and $8,313,000 at September 30, 1998 and 1999, respectively.

Software Development Costs: The Company accounts for software development costs in accordance with SOP 98-1, Accounting for the Costs of Computer Software Developed for or Obtained for Internal Use, which requires the capitalization of certain costs incurred in connection with developing or obtaining software for internal use. During 1998 and 1999, approximately $5,150,000 and $5,393,000, respectively, of costs were capitalized in connection with the development of internal software systems. Included in these amounts are $230,000 and $285,000 of capitalized interest in 1998 and 1999, respectively. Capitalized costs are amortized over the estimated useful lives of each system when complete and ready for its intended use.

Customer Layaway Deposits: Customer layaway deposits are recorded as deferred revenue until the entire related sales price has been collected and the related merchandise has been delivered to the customer.

Property and Equipment: Property and equipment are stated at cost. Provisions for depreciation are computed on a straight line basis using estimated useful lives of 30 years for buildings and 5 to 10 years for furniture, equipment, leasehold improvements, and software development costs.

Intangible Assets: Intangible assets consist primarily of excess purchase price over net assets acquired in acquisitions. Excess cost over fair value of net assets acquired (or goodwill) is amortized on a straight-line basis over 20 to 40 years (the expected period of benefit). Accumulated amortization of goodwill was approximately $6,217,000 and $6,811,000 at September 30, 1998 and 1999, respectively. Accumulated amortization of all other intangible assets was approximately $6,553,000 and $6,795,000 at September 30, 1998 and 1999, respectively.

Long-Lived Assets: Long-lived assets (i.e., property, equipment, and intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the net book value of the asset may not be recoverable. An impairment loss would be recognized if the sum of the expected future cash flows (undiscounted and before interest) from the use of the asset is less than the net book value of the asset. The amount of the impairment loss, if any, would be measured as the difference between the net book value and the estimated fair value of the related assets.

Fair Value of Financial Instruments: The fair value of financial instruments is determined by reference to various market data and other valuation techniques, as appropriate. Unless otherwise disclosed, the fair values of financial instruments approximate their recorded values, due primarily to their short term nature.

Foreign Currency Translation: The Company's equity investment in A&B is translated into U.S. dollars at the exchange rate as of A&B's balance sheet date (June 30). The related interest in A&B's net income is translated at the average exchange rate for each six month period reported by A&B. Resulting translation adjustments are reflected as a separate component of stockholders' equity.

Advertising: Advertising costs are expensed as incurred. Advertising expense was approximately $1,267,000, $1,208,000, and $1,467,000 for the fiscal years ended September 30, 1997, 1998, and 1999, respectively.

Income Taxes: The Company files a consolidated return with its wholly owned subsidiaries. Deferred taxes are recorded based on the liability method and result primarily from differences in the timing of the recognition of certain revenue and expense items for federal income tax purposes and financial reporting purposes.

Stock-Based Compensation: The Company accounts for its stock based compensation plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). SFAS 123 encourages expensing the fair value of employee stock options, but allows an entity to continue to account for stock based compensation to employees under APB 25 with disclosures of the pro forma effect on net income had the fair value accounting provisions of SFAS 123 been adopted. These pro forma disclosures are effective for option grants in fiscal years 1996 and after. The Company has calculated the fair value of options granted in these periods using the Black-Scholes option pricing model and has determined the pro forma impact on net income. See Note G, Common Stock, Warrants, and Options.

Segments: The Company adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131") in fiscal 1999. The adoption of SFAS 131 did not have a significant effect on the disclosure of segment information as the Company continues to consider its business activities as a single segment.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such difference may be material.

Reclassifications: Certain prior year financial statement balances have been reclassified to conform with the 1999 presentation.

Derivative Instruments and Hedging Activities: In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133." SFAS 133, as deferred by SFAS 137, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. Management of the Company does not anticipate that the adoption of the new Statement will have an effect on results of operations or the financial position of the Company.

Note B: Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share." Statement 128 replaces the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the Statement 128 requirements. The impact of Statement 128 has not materially changed the current calculation of earnings per share as the dilutive effect of stock options and warrants outstanding is not currently material.

The following table sets forth the computation of basic and diluted earnings per share:

For the 12 months ended September 30, 1999, options to purchase 1,534,763 weighted average shares of common stock at an average price of $11.30 per share were outstanding. These options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of common shares and, therefore, the effect would be anti-dilutive.

For the 12 months ended September 30, 1998, options to purchase 618,643 weighted average shares of common stock at an average price of $13.36 per share were outstanding. These options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of common shares and, therefore, the effect would be anti-dilutive.

For the 12 months ended September 30, 1997, options to purchase 619,203 weighted average shares of common stock at an average price of $13.22 per share were outstanding. These options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of common shares and, therefore, the effect would be anti-dilutive.

Note C: Acquisition of Pawn Stores and Purchase of Pawn Related Assets

During the fiscal years ended September 30, 1998 and 1999, the Company paid approximately $4.5 million and $1.8 million, respectively, for the acquisition of pawn stores and the purchase of certain pawn related assets. The purchase price for the acquisitions was funded primarily from an existing bank line of credit. These acquisitions have been accounted for under the purchase method of accounting. The operating results of the acquired locations have been included in the Company's consolidated results of operations since their respective purchase dates. Excess of cost over the fair value of the assets acquired of approximately $1,538,000 and $629,000 in 1998 and 1999, respectively, is being amortized on a straight-line basis over periods ranging from 20 to 40 years.

There were no acquisitions during the fiscal year ended September 30, 1997.

Since none of these acquisitions are material to the results of operations or financial position of the Company (individually or collectively) no pro forma results have been presented.

On March 28, 1998, the Company acquired 29.99% of the common shares of Albemarle & Bond Holdings, plc ("A&B") for approximately $10.8 million. On October 16, 1998, the Company acquired an additional 1,896,666 newly issued common shares of A&B for approximately $2 million. Following this purchase the Company owns 13,276,666 common shares of A&B, or approximately 29.86% of the total outstanding shares. A&B is primarily engaged in pawnbroking, retail jewelry sales and check cashing in England and Wales. The excess of the purchase price over the fair market value of net assets acquired of approximately $9.0 million is being amortized over 20 years. Summarized financial information for this equity investment is not presented since the investment is not material in relation to the financial position or results of operations of the Company. The acquisition is accounted for using the equity method. Since A&B's fiscal year ends June 30, the income reported by the Company for its investment in A&B is on a three month lag. The income reported for the Company's fiscal year end of September 30 represents its percentage interest in the results of A&B's operations, reduced by the amortization of the excess purchase price over fair market value, from April 1 to June 30, 1998 and from July 1, 1998 to June 30, 1999 for Fiscal 1998 and Fiscal 1999, respectively. A&B's shares are listed on the Alternative Investment Market of the London Stock Exchange and at September 30, 1999, the market value of this investment was approximately $9.8 million, based on the closing market price on that date.

Note D: Property and Equipment

Major classifications of property and equipment were as follows:

Note E: Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

Note F: Long-Term Debt

Long-term debt consisted of:

On December 10, 1998, the company completed a new $110 million syndicated credit facility and amended this facility (the "First Amendment") on September 29, 1999. The First Amendment increased the leverage ratio covenant for the fiscal quarters ending September 30, 1999 and December 31, 1999 and provided for a decrease in the fixed charge coverage covenant in the quarter that a planned sale-leaseback transaction is completed and the following quarter. The new credit facility as amended is unsecured and matures December 3, 2001. Terms of the credit agreement require, among other things, that the Company meet certain financial covenants. The outstanding balance under the facility bears interest, payable monthly, at the agent bank's Prime Rate or Eurodollar rate plus 87.5 to 175 basis points, depending on certain performance criteria. In addition, the Company pays an unused commitment fee equal to a fixed rate of 25 basis points of the unused amount of the total commitment. The Company has a $691,300 letter of credit with a bank group as required by a legal agreement relating to certain insurance policies.

Note G: Common Stock, Warrants, and Options

The capital stock of the Company consists of two classes of common stock designated as Class A Non-voting Common Stock and Class B Voting Common Stock. The rights, preferences, and privileges of the Class A and Class B Common Stock are similar except that each share of Class B Common Stock has one vote and each share of Class A Common Stock has no voting privileges. All Class A Common Stock is publicly held. Holders of Class B Voting Common Stock may, individually or as a class, convert some or all of their shares into Class A Non-voting Common Stock. Class A Common Stock becomes voting common stock upon the conversion of all Class B Common Stock to Class A Common Stock. The Company is required to reserve such number of authorized but unissued shares of Class A Non-voting Common Stock as would be issuable upon conversion of all outstanding shares of Class B Voting Common Stock.

At September 30, 1999, warrants to purchase 23,579 shares of Class A Non-voting Common Stock and 4,074 shares of Class B Voting Common Stock at $6.17 per share were outstanding. The warrants are exercisable through July 25, 2009.

The Company has an Incentive Stock Option Plan (the "1991 Plan") under which options to purchase Class A Non-voting Common Stock may be granted to employees. Options granted under the 1991 Plan are generally granted at exercise prices equal to or greater than the fair market value of the Class A Common Stock on the date of grant. The options vest at 20% each year and are fully vested in five years. They have a contractual life of ten years. In October 1994, the Board of Directors increased the number of shares available under the 1991 Plan to 1,800,000 and amended the 1991 Plan to provide accelerated vesting upon a change in control of the Company. As of September 30, 1999, the Company had 582,273 options outstanding (options granted less options canceled due to employee termination), under the 1991 Plan, at exercise prices ranging from $11.00 to $21.75 and a weighted average remaining contractual life of 5.1 years. Of these options, 482,463 are vested with a weighted average exercise price of $13.35 per share and none have been exercised. A summary of 1991 Plan activity for each of the three fiscal years ended September 30, 1997, 1998 and 1999 follows:

Stock Option Plans