Amendment # 2 Form S-1

S-1/A 1 ds1a.htm AMENDMENT # 2 FORM S-1 Amendment # 2 Form S-1

As filed with the Securities and Exchange Commission on April 20, 2004

Registration No. 333-113593

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 2

Form S-1

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

Jackson Hewitt Tax Service Inc.

(Exact name of registrant as specified in charter)

Delaware

7291

20-0779692

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

7 Sylvan Way

Parsippany, New Jersey 07054

(973) 496-1040

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Susan J. LoFrumento, Esq.

Vice President and General Counsel

Jackson Hewitt Tax Service Inc.

7 Sylvan Way

Parsippany, New Jersey 07054

(973) 496-1040

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

Gregory A. Fernicola, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

(212) 735-3000

Eric J. Bock, Esq.

Executive Vice President,

Law and Secretary

Cendant Corporation

9 West 57th Street

New York, New York 10019

(212) 413-1800

Vincent J. Pisano, Esq.

Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, New York 10022

(212) 446-4800

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) 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(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, check the following box. ¨

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, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be offered until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated April 20, 2004.

Jackson Hewitt Tax Service Inc.

Common Stock

This is an initial public offering of shares of common stock of Jackson Hewitt Tax Service Inc.

Cendant Corporation, the sole stockholder of Jackson Hewitt, is offering shares. Jackson Hewitt will not receive any of the proceeds from the sale of the shares being offered hereby, unless the underwriters exercise their option to purchase additional shares.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . Jackson Hewitt intends to list the common stock on the under the symbol “JTX.”

See “ Risk Factors” on page 8 to read about factors you should consider before buying shares of common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total
Initial public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to selling stockholder	$	$

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from Jackson Hewitt at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares in New York, New York on , 2004.


Goldman, Sachs & Co.		JPMorgan

Prospectus dated , 2004.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the section entitled “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless otherwise indicated, the terms “Jackson Hewitt,” the “Company,” “we,” “us” and “our” refer to Jackson Hewitt Tax Service Inc. together with its subsidiaries. Unless otherwise indicated or the context requires, the term “office” refers to any location where individuals may obtain Jackson Hewitt tax preparation services and the terms “Jackson Hewitt network” and “network” refer to our franchised, together with our company-owned, offices. Unless otherwise indicated or the context requires, “Cendant” refers to Cendant Corporation, together with its subsidiaries, excluding Jackson Hewitt. Unless otherwise indicated or the context requires, yearly references contained throughout this prospectus refer to our fiscal year which ends on April 30.

Jackson Hewitt

Jackson Hewitt is the second largest paid tax return preparer in the United States, based on the number of tax returns filed by paid preparers, with a nationwide network comprised of 4,295 franchised offices and 642 company-owned offices as of January 31, 2004. We have grown rapidly, more than doubling the number of offices in our network since 1998 and our annual volume of tax returns prepared since 1999. Despite our growth and industry position, the 2.8 million tax returns our network prepared in 2003 represented less than 4% of the total paid tax return preparer industry in the United States. Until the completion of this offering, Cendant Corporation, or Cendant, will be our sole stockholder. Cendant is selling all of its ownership stake in us in this offering. We will not receive any proceeds from the sale of shares of common stock offered by Cendant. Immediately prior to the completion of this offering, we will declare a special dividend to Cendant in the amount of $ million (consisting of $ million of cash and cancellation of a $ million receivable from Cendant).

In 2003, our net revenues were $171.5 million, which were generated primarily from three sources: royalty and advertising fees paid by our franchisees (37% of net revenues), service revenue including tax return preparation and related service fees provided at company-owned offices (28% of net revenues), and fees and other revenue received from financial institutions in connection with our facilitation of the sale of financial products (28% of net revenues). Because of the higher profit margins inherent in the franchise model, our franchise revenues contribute a disproportionately higher percentage of our income from operations than those of our company-owned offices. In 2003, our net income was $41.1 million.

Complementing our franchise system are our company-owned offices. Increases in revenues and earnings of our company-owned offices are derived from growth in our operations and through our acquisition of independent tax return preparation businesses. Service revenue from our company-owned offices was $48.4 million in 2003, an increase of approximately 17% compared to 2002. Tax returns filed by our company-owned offices represented 13% of the total tax returns filed by the Jackson Hewitt network in 2003.

Additionally, to meet the needs of our customers, we facilitate the sale of financial products that are primarily designed to accelerate the availability of funds to our customers and enable them to have their tax returns prepared by trained preparers with no cash outlay at the time of filing. In 2003, our customers purchased nearly 2.4 million financial products in conjunction with having their tax returns prepared by us, approximately 26% more than in 2002. We continue to develop and offer financial products to meet our customers’ needs and generate incremental revenue.

Industry Opportunity

Jackson Hewitt is the second largest paid tax return preparer in the United States, based on the number of tax returns filed by paid preparers, with less than a 4% share, and H&R Block is the largest, with an approximate 21% share. The remaining 75% of the paid tax return preparer industry is highly fragmented and consists of tens of thousands of paid tax return preparers. In 2003, Jackson Hewitt’s network had the potential to reach only 30% of the population that used paid tax return preparers. As we expand into new territories and increase our penetration of existing territories, we believe we are well positioned to increase our share of the paid tax return preparer segment because of our strong brand name, our franchise model, our electronic filing capability and our ability to offer our customers fast and convenient means of obtaining funds associated with their tax refunds.

Growth Strategy

Our objective is to grow our revenues and net income by pursuing the following six strategic initiatives:

Increase the Number of Offices in Our Network. The core element of our growth strategy is to expand our network. In 2003, our existing territories were largely under-penetrated, with only 19% of our territories having reached our target of at least three offices per territory. We also plan to expand into new territories by selling new franchises, converting established third-party tax preparation businesses to our franchise system and acquiring established tax return preparation businesses to be company-owned offices. Additionally, we will continue to utilize our relationships with large retailers to enhance office growth in both existing and new markets. As of January 31, 2004, our network had approximately 1,500 offices in retailer locations nationwide, including approximately 1,100 in Wal-Mart stores.

Increase the Number of Tax Returns Filed by Our Existing Offices. To generate more tax returns throughout our network, we expect to increase both the number of offices and the number of tax returns filed by existing offices. In 2003, we increased same-store tax return volume by 6%, despite limited growth in the overall market for tax returns filed by paid tax return preparers. However, our network has yet to achieve its full potential, since 57% of our offices have been part of our network for fewer than five years and our experience has demonstrated that the number of tax returns filed per office grows as offices mature. We also expect to increase the number of tax returns filed within our office network through improved marketing efforts, operational and productivity enhancements and a focus on growing our share of late-season filers.

Increase Our Profitability by Using Our Franchise Model. Our franchise model enables us to grow more quickly with less capital investment and lower operating expenses than if we directly operated all of the offices in our network. The franchise model has an inherently higher profit margin than that of our company-owned offices, as our existing infrastructure permits additional franchise growth without significant additional fixed cost investment.

Increase the Profitability of Company-Owned Offices. We intend to improve the profitability of our company-owned offices by focusing on growth and by taking advantage of our previous investments in infrastructure. While we will continue to pursue acquisition opportunities for our company-owned office network, we are focused primarily on organic growth through the opening of new company-owned offices within existing owned territories as well as increasing office productivity.

Continue to Focus on Offering Innovative Financial Products. We continually develop and introduce new products designed to attract and retain customers and generate incremental revenue. The primary financial products we offer are refund anticipation loans, accelerated check refunds and assisted direct deposit, which help our customers obtain access to funds more quickly than if they filed tax returns on their own. We also develop and introduce innovative products, including the introduction since 2000 of the Jackson Hewitt CashCard, HELP, Gold Guarantee and Money Now.

Expand into New Markets. One of our long-term strategies is to expand into markets with income tax systems similar to the United States’, such as Canada and Puerto Rico. We also plan to develop products and services to capture customers in the growing online segment.

Our growth strategy is subject to a number of risks. These risks include normal business risks, such as the possibility that we will be unable to sustain past growth trends, that changes in tax laws or regulation of financial products could make our products and services less desirable for consumers or less profitable for us and other risks associated with our franchise model, including our lack of control over franchisee operations. We are also subject to risks related to our becoming an independent public company and our dependence on services from Cendant. Investment in our common stock also presents additional risks. The highly seasonal nature of our business may increase the volatility of the trading price of the common stock. Our dividend policy is new and our ability to pay dividends in the future will be dependent on numerous business conditions. Please see “Risk Factors” for information about these and other risks related to our business and this offering.

Recent Developments

For the eleven months ended March 31, 2004, our network filed 2.8 million tax returns, an increase of 11.7% as compared to the same period in the prior year. For the total industry, the IRS received 81 million individual tax returns from January 1, 2004 through April 2, 2004, an increase of 1% as compared to the prior year. For the eleven months ended March 31, 2004, net revenue was $187.3 million, income before income taxes was $65.7 million, which included an $8.9 million litigation charge, and net income was $39.6 million, which included the impact of the litigation charge, net of tax, of $5.4 million. The average revenue per tax return in our network was $147.71, an increase of 6.1% as compared to the prior year.

Relationship with Cendant

Concurrently with the closing of this offering, we will enter into a transitional services agreement with Cendant to provide for an orderly transition to being an independent public company and to govern continuing business arrangements between us and Cendant. Under the transitional services agreement, Cendant will agree to provide us with various services that are important to our business. The transitional services agreement will also provide that we will indemnify Cendant and its affiliates for potential losses related to the operation of our business prior to this offering and other matters. See “Certain Relationships and Related Transactions.”

New Indebtedness

Concurrently with the closing of this offering, we will enter into a new revolving credit facility with a syndicate of financial institutions, including affiliates of several of the underwriters of this offering. The revolving credit facility will provide for borrowings of up to $100 million and will have a -year maturity. We also intend to issue $175 million aggregate principal amount of fixed and/or floating rate notes to a limited group of institutional investors concurrently with the closing of this offering. We expect that the term of each series of notes will be five years. The new credit facility and the agreements governing the notes will contain restrictions on our operating flexibility and on our ability to pay dividends to our stockholders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—New Indebtedness.”

Company Information

Jackson Hewitt Tax Service Inc. was incorporated in Delaware on February 20, 2004 as a holding company. Our only material asset is 100% of the equity of Jackson Hewitt Inc., our principal operating subsidiary, which franchises the Jackson Hewitt Tax Service brand and owns Tax Services of America, Inc., or TSA. TSA operates our company-owned offices. Jackson Hewitt Inc. was incorporated in Virginia in 1985. In January 1998, Jackson Hewitt Inc. became a wholly owned subsidiary of Cendant. You may contact us at our principal executive offices at 7 Sylvan Way, Parsippany, New Jersey 07054 or by telephone at (973) 496-1040. Our Internet website address is http://www.jacksonhewitt.com. Any information contained on our website is not a part of this prospectus.

The Offering


Common stock offered by the selling stockholder		37,500,000 shares

Common stock to be outstanding after this offering		shares(1)

Voting rights		Holders of our common stock are entitled to one vote per share on all matters submitted to a vote.

Use of proceeds		We will not receive any proceeds from the sale of shares of common stock offered by Cendant. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds to us from the sale of the additional shares of common stock will be $ , after deducting the underwriting discount. We expect to use any proceeds from the exercise of the underwriters’ option to purchase additional shares for general corporate purposes, which may include repayment of indebtedness or repurchases of shares of our common stock.

Dividend policy		We intend to pay quarterly cash dividends on our common stock at an initial rate of $ per share of common stock ($ per annum), commencing , 2004. The declaration and payment of future dividends will be at the discretion of our board of directors and will depend upon many factors which are described under “Dividend Policy” and elsewhere in this prospectus.

Risk factors		See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Stock exchange listing		We intend to list our common stock on the under the symbol “JTX.”

(1)

Assumes that the underwriters do not exercise their option to purchase additional shares. If the underwriters exercise their option to purchase additional shares in full, we will issue and sell 5,625,000 additional shares of common stock and there will be a total of shares of common stock outstanding after this offering. The number of shares of common stock to be outstanding after this offering excludes shares reserved for issuance upon exercise of options that will be outstanding upon completion of this offering.

Following the closing of this offering, our officers and various employees will receive shares of our common stock and options to purchase our common stock in exchange for Cendant restricted stock units and Cendant stock options currently held by them. The number of shares of our common stock, the exercise price of the options and the number of shares of our common stock issuable upon exercise of such options will depend on the relative trading prices of our common stock and Cendant’s common stock following the closing of this offering. For purposes of this preliminary prospectus, share numbers and option amounts are based on the midpoint of the initial public offering price range set forth on the cover page of this prospectus and Cendant’s stock price as of a recent date. The actual amounts will change based on our stock price and Cendant’s stock price following the closing.

Summary Consolidated Financial Information

The following tables summarize the consolidated financial information for our business. You should read these tables along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

We derived the summary consolidated statements of operations data for the nine months ended January 31, 2004 and for each of the three years in the period ended April 30, 2003 and the summary consolidated balance sheet data as of January 31, 2004, set forth below, from our audited consolidated financial statements included elsewhere in this prospectus. We derived the summary consolidated statement of operations data for the nine months ended January 31, 2003 from our unaudited interim consolidated financial statements. In management’s opinion, these unaudited interim consolidated financial statements have been prepared on substantially the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial information for the periods presented.

Our financial statements may not be indicative of expenses that would have resulted if we had operated independently of Cendant as a public company. The pro forma statement of operations data below reflects: (i) interest expense on our new indebtedness, (ii) increases in costs related to the replacement of services provided by Cendant and (iii) additional costs of being a public company, as if this offering and the notes placement had occurred on May 1, 2003. The pro forma amounts are based on certain assumptions and estimates which management believes are reasonable. However, there can be no assurance that these assumptions will prove correct or that actual amounts will not differ materially from these estimates. The as adjusted balance sheet data as of January 31, 2004 reflect the issuance of the notes and a special dividend to Cendant in the amount of $ million (consisting of $ million of cash and cancellation of a $ million receivable from Cendant).


	Pro Forma(1)
	Fiscal Year Ended April 30,	Nine Months Ended January 31,						Fiscal Year Ended April 30,
	2004	2004(2)			2003			2003		2002(3)		2001
Statement of Operations Data (in thousands, except per share data):
Revenues:
Royalty and advertising revenue	$	$	25,470		$	20,778		$	63,900	$	52,901	$	45,749
Service revenue from company-owned operations			20,995			16,580			48,420		41,252		—
Financial product fees			11,624			9,216			25,037		21,635		16,618
Other financial product revenue			6,678			5,554			23,110		29,518		3,447
Other			8,077			6,886			11,080		11,685		9,691

Net revenues			72,844			59,014			171,547		156,991		75,505

Expenses:
Operating			38,911			32,065			53,155		37,208		12,861
Marketing and advertising			18,334			15,563			25,086		18,836		13,474
Selling, general and administrative			22,660			11,648			14,997		17,882		13,955
Depreciation and amortization(4)			8,941			8,478			11,523		12,824		13,990

Total expenses			88,846			67,754			104,761		86,750		54,280

Income (loss) from operations			(16,002	)		(8,740	)		66,786		70,241		21,225
Other income:
Interest income (expense), net			287			671			791		1,449		1,842
Preferred stock dividends from TSA			—			—			—		1,768		1,181

Income (loss) before income taxes			(15,715	)		(8,069	)		67,577		73,458		24,248
Provision for (benefit from) income taxes			(6,244	)		(3,154	)		26,444		30,935		13,298

Net income (loss)	$	$	(9,471	)	$	(4,915	)	$	41,133	$	42,523	$	10,950

Pro forma earnings (loss) per share(5):
Basic	$	$			$			$		$		$
Diluted	$	$			$			$		$		$


	Nine Months Ended January 31,						Fiscal Year Ended April 30,
	2004(2)			2003			2003			2002(3)			2001
Other Operating Data:
Offices:
Franchise operations		4,295			3,776			3,776			3,385			3,345
Company-owned office operations		642			523			523			440			—

Total system		4,937			4,299			4,299			3,825			3,345


Tax returns (in thousands):
Franchise operations		944			804			2,461			2,200			2,212
Company-owned office operations		135			115			365			325			—

Total system		1,079			919			2,826			2,525			2,212


Average revenue per tax return:
Franchise operations (6)	$	144.44		$	139.00		$	139.67		$	130.76		$	113.58
Company-owned office operations (7)	$	155.36		$	144.19		$	132.66		$	126.93		$	—
Total system	$	145.81		$	139.65		$	138.77		$	130.26		$	113.58

Average franchise royalty and advertising rate (8)		18.68	%		18.59	%		18.59	%		18.39	%		18.21	%

Financial products (in thousands)		860			719			2,396			1,906			1,337
Average financial product fees per product (9)	$	13.52		$	12.82		$	10.45		$	11.35		$	12.43


	As of January 31, 2004
	Actual		As Adjusted
Consolidated Balance Sheet Data (in thousands):
Cash and cash equivalents	$	8,403	$
Working capital		32,226
Total assets		658,657
Long-term debt		—
Stockholder’s equity		602,665

(1)

Reflects: (i) $ million of interest expense associated with indebtedness under the new credit facility and notes, assuming the average aggregate principal amount outstanding under the new credit facility and the notes was $ million and $ million, respectively, and the average annual interest rate was % on the new credit facility and % on the notes; (ii) $ million of increased costs related to the replacement of services provided by Cendant, which include insurance costs, employee benefits and additional staffing; and (iii) $ million of additional public company costs, including equity compensation, director and officer insurance, directors fees and other costs associated with being a public company. Pro forma amounts do not reflect a non-recurring compensation charge of approximately $ million associated with issuing common stock and options to purchase common stock to officers and employees in exchange for Cendant restricted stock units and Cendant options currently held by them. Other operating data is not affected by the pro forma adjustments.

(2)	Selling, general and administrative expenses for the nine months ended January 31, 2004 included an $8.9 million charge associated with a litigation settlement.

(3)	During 2002, we completed our acquisition of TSA, which affected our results of operations as discussed in Note 9 to our consolidated financial statements.

(4)

On January 1, 2002, we adopted the non-amortization provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142. Accordingly, our results of operations before January 1, 2002 reflect the amortization of goodwill and indefinite-lived intangible assets, while our results of operations after January 1, 2002 do not reflect this amortization. See Note 2 to our consolidated financial statements for a discussion of our results of operations during the fiscal years ended 2002 and 2001 after applying the non-amortization provisions of SFAS No. 142.

(5)	Based on total shares or total shares on a diluted basis, expected to be outstanding subsequent to the initial public offering for all periods presented.

(6)	Calculated as tax preparation revenue and related fees received by franchisees divided by the number of tax returns prepared by franchisees. We earn royalty and advertising revenue based on revenue received by our franchisees.

(7)	Calculated as tax preparation revenue and related fees received by company-owned offices divided by the number of tax returns prepared by company-owned offices.

(8)	Calculated as total royalty and advertising fees received from franchisees divided by total tax preparation revenue and related fees received by franchised offices.

(9)	Calculated as total financial product fees divided by the number of financial products.

RISK FACTORS

You should carefully consider the following risks and all the information set forth in this prospectus before investing in our common stock.

Risks Relating to Our Company

Because our growth has been achieved, in part, through rapidly establishing offices in large markets for our products, we may not achieve the same levels of growth in revenues and profits in the future as we have in the past.

Historically, our business has experienced rapid growth in the number of franchises, office locations and revenues. This high growth rate has been achieved, in part, through our early concentration on rapidly establishing offices in urban areas with large markets for our products. Our ability to continue to grow our business will be subject to a number of risks and uncertainties and will depend in large part on:

finding new opportunities in our existing and new markets;

continuing to facilitate the sale of financial products;

attracting capable franchisees;

hiring, training and retaining skilled managers and seasonal employees;

expanding and improving the efficiency of our operations and systems; and

maintaining cost, quality and product innovation to attract customers.

Accordingly, we may not achieve the same levels of growth in revenues and profits as we have historically.

Because demand for our products is related to the complexity of tax return preparation, government initiatives that simplify tax return preparation may reduce demand for our financial products and services.

Many taxpayers seek assistance from paid tax return preparers such as Jackson Hewitt because of the level of complexity involved in tax return preparation and filing. From time to time, politicians and government officials propose measures seeking to simplify the preparation and filing of tax returns. The passage of any measures that significantly simplify tax return preparation may be highly detrimental to our business.

Initiatives that improve the timing and efficiency of processing tax returns could reduce the attractiveness of the financial products offered to our customers and demand for our services.

Our performance depends on our ability to offer access to financial products that increase the speed and efficiency by which our customers can receive funds associated with their tax returns. The federal government and various state and local municipalities have, from time to time, announced initiatives designed to modernize their operations and improve the timing and efficiency of processing tax returns. If tax authorities are able to increase the speed and efficiency with which they process tax returns, the value and attractiveness of the financial products offered to our customers and demand for our services could be reduced.

Changes in the tax law that result in a decreased number of tax returns filed or a reduced size of refunds could harm our business.

Over the past three fiscal years, on average, approximately 89% of our customers were entitled to receive a refund. From time to time, the Treasury Department and the IRS adopt policy and rule changes and other initiatives that result in a decrease in the number of tax returns filed or reduce the size of the refunds. Similar changes in the tax law could reduce demand for our products and services, causing our revenues or profitability to decline.

Federal and state governments could enact legislation regulating refund anticipation loans that could negatively affect our ability to facilitate the sale of these loans and reduce our profitability.

In 2003, approximately 28% of our net revenues were derived from our facilitation of refund anticipation loans. Because these loans are short-term, their effective annual percentage rate is relatively high compared to other consumer loans. While these loans are not prohibited by federal regulations, Massachusetts and Mississippi have interpreted existing laws in a manner that would effectively limit the annual percentage rate on refund anticipation loans or restrict our ability to receive fees in connection with these loans. While we currently operate, and plan to continue to operate, in these states, we and our franchisees are and will be unable to receive fees based upon the refund anticipation loans we facilitate in such states.

Consumer advocacy groups have called for a legislative and regulatory response to the perceived inequity of these types of loans. One such consumer group has proposed model legislation and advocates its adoption by various states of regulations that would place significant limitations on annual percentage rates and impose costly bonding requirements, among other things. Legislation of this type, if adopted, would increase costs to us, our franchisees and the financial institutions that provide our financial products, or could render refund anticipation loans too costly to market. In addition, various jurisdictions such as the City of New York, Illinois, Minnesota, North Carolina, and Wisconsin have imposed regulatory restraints on the marketing of refund anticipation loans. These restraints include requirements regarding specific disclosures that must be made to customers. We operate in each of these jurisdictions. We recently settled a complaint by the New York City Department of Consumer Affairs and paid a $125,000 fine and contributed $100,000 to New York City’s EITC Campaign, a program to raise public awareness of the earned income tax credit, relating to charges that we played a part in promoting refund anticipation loans in a way that was confusing to customers. In March 2004, the New York City Department of Consumer Affairs advised us that three franchised offices had not distributed refund anticipation loan disclosure documents to customers, as required by New York City law.

States presently considering some form of legislation relating to refund anticipation loans include Alabama, Arizona, California, Connecticut, Louisiana, New York, Ohio, Oklahoma, Oregon and Vermont.

Our failure to comply with legal and regulatory requirements would adversely affect our revenues and potential for future growth.

Our tax return preparation business, franchise operations, and our facilitation of the sale of financial products are subject to extensive regulation and oversight in the United States by the IRS, the Federal Trade Commission, and by state regulatory and law enforcement agencies. Failure to comply with the regulatory requirements of these government regulatory bodies and other applicable U.S. and state legal and regulatory requirements may subject us to administrative or judicially imposed

sanctions which could have a material adverse effect on our business, financial condition and results of operations. These sanctions include:

•

warning letters;

•

civil monetary damages and penalties;

•

criminal penalties; and

•

injunctions.

In addition, the financial institutions that provide services to us and our customers as servicers and lenders of refund anticipation loans and other financial products are subject to significant regulation and oversight by federal and state banking regulators. The failure of these financial institutions to comply with the regulatory requirements of federal and state government regulatory bodies, including consumer protection laws, could affect their ability to continue to provide services to us and our customers, which could have a material adverse effect on our business, financial condition and results of operations.

Our facilitation of refund anticipation loans and other financial products exposes us to the risk of significant losses as a result of litigation defense and resolution costs.

Tax return preparers who facilitate the sale of refund anticipation loans have been subject, from time to time, to individual and class action lawsuits concerning their role in facilitating these loans. These lawsuits have alleged, among other claims, collusion between the tax return preparers and lenders in violation of federal law and fraud on the part of the tax return preparers for failing to disclose the nature of the loan or that the tax return preparer receives a fee from the lender in connection with the loan. We were recently named in a purported class action lawsuit brought by Canieva Hood and Congress of California Seniors in connection with a lender’s collection of a tax refund in repayment of a defaulted refund anticipation loan. See “Business—Legal Proceedings.” Although we do not believe that these claims or other similar claims, if made against us, would have merit, and we would vigorously contest them, given the large number of refund anticipation loans we facilitate every year and the inherent uncertainties of the U.S. legal system, we could experience significant losses as a result of litigation defense and resolution costs, which would have a significant adverse impact on our business.

In addition, we are subject to federal and state laws that govern the marketing of other financial products. These laws prohibit deceptive claims, and require that our marketing practices are fair and not misleading. While we believe that the advertising and marketing of our products is truthful and not deceptive or unfair, if consumers believe they were misled, we may be subject to litigation, which could result in fines, penalties, damages or restitution and harm to our brand and reputation.

Failure to comply with laws and regulations that protect our customers’ personal information could result in significant fines and harm our brand and reputation.

Privacy concerns relating to the disclosure of consumer financial information have drawn increased attention from federal and state governments. The IRS generally prohibits the use or disclosure by tax return preparers of taxpayers’ information without the prior written consent of the taxpayer. In addition, the Gramm-Leach-Bliley Act and other Federal Trade Commission regulations require financial service providers, including tax return preparers, to adopt and disclose consumer privacy policies and provide consumers with a reasonable opportunity to opt out of having personal information disclosed to unaffiliated third parties for advertising purposes. Although we have

established security procedures to protect against identity theft, breaches of our customers’ privacy may occur. To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation or administrative sanctions, which could result in significant fines, penalties or damages and harm to our brand and reputation.

Our success is tied to the operations of our franchisees, yet our ability to exercise control over their operations is limited.

During 2003, we derived 37% of our net revenues from the receipt of franchise royalty and advertising fees from our franchisees. The amount of these royalties and fees is based on the revenues generated by franchised offices. Accordingly, our financial success depends on our franchisees and the manner in which they operate and develop their offices. Our ability to control the operations of our franchisees is limited because their businesses are independently owned and operated. Our franchisees may not operate their offices in a manner consistent with our philosophy and standards or may not increase the level of revenues generated compared to prior tax seasons.

We may be held responsible by third parties, regulators or courts for the actions of, or failures to act by, our franchisees, which exposes us to possible fines, other liabilities and bad publicity.

Our franchisees are independently owned and operated. Our agreements with our franchisees require that they learn about and comply with all laws and regulations applicable to their businesses. Under our franchise agreements, our franchisees retain control over the employment and management of all personnel, including the large number of seasonal employees required during the tax season. Third parties, regulators or courts may seek to hold us responsible for the actions or failures to act by our franchisees. Although our internal compliance department seeks to monitor the activities of our franchisees, it is unlikely to detect all problems in our network. In addition, we are parties to agreements with retailers and, to a certain extent, financial institutions under which we indemnify third parties for our and our franchisees’ failure to comply with laws and regulations applicable to us or them. Our agreements with Wal-Mart Stores, Inc., Household Tax Masters Inc. and Santa Barbara Bank & Trust are material commercial agreements under which we indemnify third parties. There are occasions when our and our franchisees’ activities are not clearly distinguishable. We recently settled a dispute with and paid a fine to the New York City Department of Consumer Affairs for a marketing program related to refund anticipation loans which related primarily to acts of our franchisees, but where the Department of Consumer Affairs attributed certain responsibilities to us. We settled the dispute by paying a $125,000 fine and contributing $100,000 to New York City’s EITC Campaign. See “Business—Legal Proceedings.” Failure to comply with laws and regulations by our franchisees may expose us to liability and damages that may adversely affect our business.

Disruptions in our relationships with our franchisees could adversely affect our business.

The continued success and growth of our franchise system depend on our maintaining a satisfactory working relationship with our franchisees. Lawsuits and other disputes with our franchisees could discourage our franchisees from expanding their business within our network or lead to bad publicity, which would discourage new franchisees from entering our network. We have recently settled a lawsuit brought by 154 of our franchisees in which they alleged, among other things, that we should have made payments to them in connection with their facilitation of refund anticipation loans. We settled this action by agreeing to make a $2 million cash payment, spend an additional $2 million in regional advertising from 2004 through 2006, pay additional rebates to franchisees of up to $3.00 per refund anticipation loan the sales of which they facilitate from 2004 through 2006 and implement a new office royalty reduction program.

Because we are not a financial institution, we can only facilitate the sale of financial products through our arrangements with financial institutions, and if such arrangements were terminated for any reason, we may not be able to replace them on acceptable terms or at all.

In 2003, approximately 28% of our net revenues were derived from our facilitation of the sale of financial products provided to our customers by financial institutions. In addition, our tax return preparation business is, to some extent, dependent on our ability to facilitate the sale of these products, because our customers are often attracted to our business by the availability of these products. Financial products designed to monetize future tax refunds are specialized financial products, and relatively few financial institutions offer them. We currently have agreements with Household and Santa Barbara. Our agreement with Household terminates December 31, 2005 and our agreement with Santa Barbara terminates on . After the termination of these agreements, we may not be able to renew them on similar terms or at all. If our arrangements with the financial institutions that provide our financial products were to terminate and we were unable to enter into an alternative relationship with one or more other financial institutions on acceptable terms or at all, our financial results would be adversely affected.

Disruptions in our relationships with large retailers could negatively affect our growth and profitability.

At January 31, 2004, our network had approximately 1,500 offices located within national and large regional retailers and shopping malls, which generated approximately % of the tax returns prepared by our network. Of these offices, approximately 1,100 were located within Wal-Mart stores, which generated approximately % of the tax returns prepared by our network. Our ability to operate in these stores is dependent on our ability to negotiate favorable agreements with retailers and on the continued operation of these stores. Our agreements with retailers are of limited duration, typically two years, and we may not be able to renew them on similar terms or at all. In addition, many of these agreements are not exclusive. In the event we are unable to negotiate favorable agreements with these or comparable retailers or they close a significant number of stores, especially immediately prior to or during the tax season, our business could incur significant short-term loss of revenue and, for our company-owned offices, costs for office relocation.

The highly seasonal nature of our business presents a number of financial risks and operational challenges.

Our business is highly seasonal. We generate substantially all our revenue during the tax season, which is the period from January through April 15. Additionally, the majority of our revenue is generated in late January and February. The concentration of our revenue-generating activity during this relatively short period presents a number of operational challenges for us and our franchisees, including:

cash and resource management during the first eight months of our fiscal year, when we generally operate at a loss and incur fixed costs and costs of preparing for the upcoming tax season;

flexible staffing, because the number of employees at our network’s offices during the peak of the tax season is exponentially higher than at any other time;

accurate forecasting of revenues and expenses; and

ensuring optimal uninterrupted operations during peak season.

If we were unable to meet these challenges or we were to experience significant business interruptions during the tax season, which may be caused by labor shortages, systems failures, work

stoppages, adverse weather or other events, many of which are beyond our control, we could experience cash shortages and loss of business, which would have a material adverse effect on our business and results of operations.

We rely on Cendant to provide transitional services to us and may not be able to replace those services at the same cost.

Simultaneously with this offering, we will enter into agreements that will require Cendant to provide transitional services to us. Specifically, we will enter into a transitional services agreement and a sub-lease agreement for our New Jersey corporate headquarters location. The terms of the services to be provided under the transitional services agreement vary depending on the specific service to be provided, with the majority of the terms expiring by December 31, 2005 with the exception of information technology and telecommunications services which expire two years and three years, respectively, from the date of this offering. We may be unable to sustain these services at the same level as when we were controlled by Cendant. After the expiration of these agreements, we may not be able to replace these services in a timely manner or on terms and conditions, including cost, as those we have historically received from Cendant. These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the context of this offering. Accordingly, these agreements may not reflect terms that would have resulted from arms-length negotiations with unaffiliated third parties. After this offering, we intend to transition such services to similar services to be provided by our internal resources, as well as to contract with unaffiliated third party providers for which we expect to incur higher costs. Such cost increase is expected to be approximately $ million per year, excluding direct public company expenses such as directors and officers insurance, a new equity compensation plan, board of director fees and external audit fees, which may adversely affect our profitability.

We may incur significant liability to Cendant pursuant to the indemnification provisions of the transitional services agreement.

The transitional services agreement will provide that we will indemnify Cendant and its affiliates against potential losses based on, arising out of or resulting from:

any breach by us of the transitional services agreement or any other agreement with Cendant;

the ownership or the operation of our assets or properties and the operation or conduct of our business, whether in the past or future, including any currently pending litigation against Cendant with respect thereto;

any other activities we engage in;

any third party claims relating to other acts or omissions arising out of performance of the transitional services agreement and the sub-lease whether in the past or future;

any guaranty, keepwell, net worth or financial condition maintenance agreement of or by Cendant provided to any parties with respect to any of our actual or contingent obligations;

Securities Act liabilities related to this offering; and

other matters described in the transitional services agreement.

If Cendant were to invoke these indemnification obligations, we could suffer significant losses.

Our network faces significant competition in the tax return preparation business and faces a competitive threat from software providers and Internet businesses that increasingly enable and encourage taxpayers to prepare their own returns.

The tax return preparation business is highly competitive. Our network competes with H&R Block, which is larger and more widely recognized than us, and with smaller independent tax return

preparation services, small national and regional franchisors, regional tax return preparation businesses, regional and national accounting firms and financial service institutions that prepare tax returns as part of their businesses. We also compete with volunteer organizations that prepare tax returns at no cost for low-income taxpayers. Online filing alternatives and service providers and software vendors offer products and services that enable untrained individuals to prepare and file their own tax returns. The availability of these alternatives may reduce demand for our products and limit the amount of fees that we can charge. Competitors may develop or offer more attractive or lower cost products and services than ours which could erode our customer base.

Our business relies on technology systems and electronic communications, which, if disrupted, could significantly affect our business.

Our ability to file tax returns electronically and to facilitate the sale of financial products depends on our ability to electronically communicate with all of our network’s offices, the IRS and the financial institutions that provide the financial products we offer. Our electronic communications network is subject to disruptions of various magnitudes and durations. Any severe disruption of our network or electronic communications, especially during the tax season, could impair our ability to complete our customers’ tax filings, to facilitate the sale of financial products or to maintain our operations, which, in turn, could have a material adverse effect on our business and results of operations.

We are a holding company that depends on cash flow from our subsidiaries to meet our obligations.

We are a holding company with no material assets other than the stock of our subsidiaries. Accordingly, all our operations are conducted by our subsidiaries. As a holding company, we require dividends and other payments from our subsidiaries to meet cash requirements or to pay dividends. If our subsidiaries are unable to pay us dividends and make other payments to us when needed, we will be unable to pay dividends or satisfy our obligations, including interest and principal payments, under our new credit facility or the notes.

Our new credit facility and the agreements governing the notes will contain restrictive covenants and other requirements that may limit our business flexibility by imposing operating and financial restrictions on our operations.

The agreements governing our indebtedness will impose significant operating and financial restrictions on us. Our new credit facility and notes will include restrictive covenants that will require us to maintain specified financial ratios and satisfy financial condition tests. Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants may prevent us from incurring additional indebtedness to expand our operations and execute our growth strategy. In addition, a breach of any of these covenants, ratios or tests could result in a default under the agreements governing our indebtedness. Upon the occurrence of an event of default under the new credit facility or the notes, the lenders or noteholders could elect to declare all amounts owed to them, together with accrued interest, to be immediately due and payable. If the lenders or noteholders accelerate the payment of the indebtedness, our assets may not be sufficient to repay the indebtedness and we may be unable to otherwise satisfy creditor claims.

Our floating rate debt financing exposes us to interest rate risks.

Following this offering, we will have $ million of floating rate debt outstanding and we may borrow up to $100 million of additional funds under our new credit facility, all of which bears interest at

rates that vary with prevailing market interest rates. Accordingly, a rise in market interest rates will adversely affect our financial results. We expect to draw most heavily on the new credit facility from May through February of each year and then repay a significant portion of this debt by the end of each tax season. Therefore, a significant rise in interest rates during our off-season will have a disproportionate impact on our profitability.

Risks Related to Our Common Stock

Because the tax season is relatively short and straddles two fiscal quarters, our quarterly results may not be indicative of our performance, which may increase the volatility of the trading price of our common stock.

We experience quarterly variations in revenues and operating income as a result of many factors, including the highly seasonal nature of the tax return preparation business, the timing of off-season activities and the hiring of personnel. Due to the foregoing factors, our quarter-to-quarter results vary significantly. In addition, because our peak period straddles the third and fourth fiscal quarters and a variety of factors may result in a delay or acceleration in the number of tax returns processed in January, year-to-year quarterly comparisons are not as meaningful as year-to-year tax season comparisons. To the extent our quarterly results vary significantly from year to year, our stock price may be subject to significant volatility.

Although we intend to pay dividends, in the future, our financial condition, debt covenants or Delaware law may prohibit us from doing so.

Although we initially intend to pay dividends at the rate of $ per share of common stock per quarter, the payment of dividends will be at the discretion of our board of directors and will depend, among other things, on our earnings, capital requirements and financial condition. Our ability to pay dividends will be subject to compliance with customary financial covenants that will be contained in the credit facility we expect to enter into contemporaneously with this offering. Dividends may also be limited or prohibited by any future borrowings or issuances of preferred stock. In addition, applicable law requires that our board of directors determine that we have adequate surplus prior to the declaration of dividends. We cannot assure you that we will pay dividends at the levels currently anticipated or at all.

There may be a limited public market for our common stock, and our stock price may experience volatility.

There can be no assurance that an active trading market for our common stock will develop as a result of this offering or be sustained in the future. In addition, the stock market has from time to time experienced extreme price and volume fluctuations that often have been unrelated to the operating performance of particular companies. Changes in earnings estimates by analysts and economic and other external factors may have a significant impact on the market price of our common stock. Fluctuations or decreases in the trading price of our common stock may adversely affect the liquidity of the trading market for our common stock and our ability to raise capital through future equity financing.

Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party.

Our certificate of incorporation, by-laws and our rights plan contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among other things, a classified board of directors, the elimination

of stockholder action by written consent, advance notice for raising business or making nominations at meetings and “blank check” preferred stock. Blank check preferred stock enables our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with such dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitations on conversion, as our board of directors may determine, including rights to dividends and proceeds in a liquidation that are senior to the common stock.

These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting common stock. We are also subject to certain provisions of Delaware law which could delay, deter or prevent us from entering into an acquisition, including Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a business combination with an interested stockholder unless specific conditions are met. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this prospectus. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we do not undertake any obligation to update any forward-looking statements for any reason after the date of this prospectus or to conform these statements to actual results or to changes in our expectations.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following:

our ability to achieve the same level of growth in revenues and profits that we have in the past;

government initiatives that simplify tax return preparation, improve the timing and efficiency of processing tax returns or decrease the number of tax returns filed or the size of the refunds;

government regulation and oversight, including regulation of refund anticipation loans;

our exposure to litigation;

our ability to protect our customers’ personal information;

the success of our franchised offices and our ability to exert control over them;

our responsibility to third parties for the acts of our franchisees;

disruptions in our relationships with our franchisees;

changes in our relationship with financial product providers that could affect our ability to facilitate the sale of financial products;

changes in our relationships with retailers that could affect our growth and profitability;

seasonality of our business and its effect on our stock price;

our ability to sustain or negotiate services currently provided by Cendant at reasonable costs;

competition from tax return preparation service providers;

our ability to offer innovative new products and services;

our reliance on electronic communications;

our reliance on cash flow from subsidiaries;

our compliance with debt covenants;

the effect of market conditions, general conditions in the tax return preparation industry or general economic conditions; and

changes in accounting policies or practices.

USE OF PROCEEDS

We will not receive any proceeds from the sale of shares of common stock being offered by Cendant. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds to us from the sale of the additional shares of common stock will be $ million, after deducting the underwriting discount. We expect to use any proceeds from the underwriters’ exercise of their option to purchase additional shares for general corporate purposes, which may include repayment of indebtedness or repurchase of shares of our common stock.

DIVIDEND POLICY

We intend to pay quarterly cash dividends on our common stock at an initial rate of $ per share of common stock ($ per annum), commencing , 2004. The declaration and payment of dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, legal requirements and other factors as our board of directors deems relevant. In addition, the new credit facility and agreements governing the notes may limit our ability to pay dividends, and we may in the future issue or enter into other debt instruments or agreements that could further limit our ability to pay dividends.

CAPITALIZATION

The following table sets forth our capitalization as of January 31, 2004 and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and their accompanying notes included elsewhere in this prospectus. The as adjusted amounts reflect the incurrence by us of $175 million aggregate principal amount of notes and a special dividend to Cendant in the amount of $ million (consisting of $ million in cash and cancellation of a $ million receivable from Cendant), in each case, immediately prior to the completion of this offering.


	As of January 31, 2004
	Actual		As Adjusted
	(in thousands except share data)
Credit facility	$	—	$
Series A floating-rate notes		—
Series B fixed-rate notes		—

Stockholder’s equity:
Common stock; 200,000,000 shares of common stock authorized; shares of common stock issued and outstanding (or shares of common stock issued and outstanding upon completion of this offering)		133
Additional paid-in capital		476,086
Retained earnings		126,446

Total stockholder’s equity		602,665

Total capitalization	$	602,665	$

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected consolidated financial data as of and for the nine months ended January 31, 2004, for the nine months ended January 31, 2003 and as of and for each of the years in the four-year period ended April 30, 2003. Our consolidated statement of operations data and consolidated balance sheet data for the nine months ended and as of January 31, 2004 and for each of the years in the three year period ended April 30, 2003 and as of April 30, 2003, 2002 and 2001 have been derived from our audited consolidated financial statements. We derived the selected consolidated statement of operations data for the nine months ended January 31, 2003 from our unaudited interim consolidated financial statements. Our consolidated statement of operations data and consolidated balance sheet data as of and for the year ended April 30, 2000 have been derived from our unaudited financial statements. In management’s opinion, these unaudited consolidated financial statements have been prepared on substantially the same basis as the audited consolidated financial statements. Our consolidated financial statements as of January 31, 2004 and April 30, 2003 and 2002 and for the nine months ended January 31, 2004 and for each of the years in the three-year period ended April 30, 2003 and Deloitte & Touche LLP’s audit report on these consolidated financial statements have been included elsewhere in this prospectus.

Our financial statements may not be indicative of revenues, expenses, assets, liabilities and cash flows that would have existed or resulted if we had operated independently of Cendant as a public company. The pro forma statement of operations data below reflects: (i) interest expense on our new indebtedness, (ii) increases in costs related to the replacement of services provided by Cendant and (iii) additional costs of being a public company, as if this offering and the notes placement had occurred on May 1, 2003. The pro forma amounts are based on certain assumptions and estimates which management believes are reasonable. However, there can be no assurance that these assumptions will prove correct or that actual amounts will not differ materially from these estimates. In addition, historical results do not necessarily indicate results expected for any future period. The information below is qualified in its entirety by the detailed information included elsewhere in this prospectus and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and the consolidated financial statements and the related notes included elsewhere in this prospectus.


	Pro Forma (1)
	Fiscal Year Ended April 30,	Nine Months Ended January 31,						Fiscal Years Ended April 30,
	2004	2004 (2)			2003			2003		2002(3)		2001		2000
Statement of Operations Data (in thousands, except per share data):
Revenues:
Royalty and advertising revenue	$	$	25,470		$	20,778		$	63,900	$	52,901	$	45,749	$	37,008
Service revenue from company-owned operations			20,995			16,580			48,420		41,252		—		1,107
Financial product fees			11,624			9,216			25,037		21,635		16,618		14,338
Other financial product revenue			6,678			5,554			23,110		29,518		3,447		2,178
Other			8,077			6,886			11,080		11,685		9,691		7,040

Net revenues			72,844			59,014			171,547		156,991		75,505		61,671


Expenses:
Operating			38,911			32,065			53,155		37,208		12,861		23,308
Marketing and advertising			18,334			15,563			25,086		18,836		13,474		10,200
Selling, general and administrative			22,660			11,648			14,997		17,882		13,955		15,283
Depreciation and amortization(4)			8,941			8,478			11,523		12,824		13,990		14,894

Total expenses			88,846			67,754			104,761		86,750		54,280		63,685

Income (loss) from operations			(16,002	)		(8,740	)		66,786		70,241		21,225		(2,014	)

Other income:
Interest income (expense), net			287			671			791		1,449		1,842		2,898
Preferred stock dividends from TSA			—			—			—		1,768		1,181		304

Income (loss) before income taxes			(15,715	)		(8,069	)		67,577		73,458		24,248		1,188
Provision for (benefit from) income taxes			(6,244	)		(3,154	)		26,444		30,935		13,298		3,505
Minority interest			—			—			—		—		—		(40	)

Net income (loss)	$	$	(9,471	)	$	(4,915	)	$	41,133	$	42,523	$	10,950	$	(2,277	)


	Pro Forma(1)
	Year Ended April 30,	Nine Months Ended January 31,						Fiscal Years Ended April 30,
	2004	2004(2)			2003			2003			2002(3)			2001			2000
Pro forma earnings (loss) per share(5):
Basic		$			$			$			$			$			$
Diluted		$			$			$			$			$			$
Pro forma weighted average shares outstanding:
Basic
Diluted

Other Operating Data:
Offices:
Franchise operations			4,295			3,776			3,776			3,385			3,345			2,765
Company-owned office operations			642			523			523			440			—			37

Total system			4,937			4,299			4,299			3,825			3,345			2,802

Tax returns (in thousands):
Franchise operations			944			804			2,461			2,200			2,212			1,759
Company-owned office operations			135			115			365			325			—			13

Total system			1,079			919			2,826			2,525			2,212			1,772


Average revenue per tax return:
Franchise operations(6)		$	144.44		$	139.00		$	139.67		$	130.76		$	113.58		$	113.56
Company-owned office operations(7)		$	155.36		$	144.19		$	132.66		$	126.93			—		$	88.05
Total system		$	145.81		$	139.65		$	138.77		$	130.26		$	113.58		$	113.37

Average franchise royalty and advertising rates(8)			18.68	%		18.59	%		18.59	%		18.39	%		18.21	%		18.13	%

Financial products (in thousands)			860			719			2,396			1,906			1,337			1,164
Average financial product fees per product(9)		$	13.52		$	12.82		$	10.45		$	11.35		$	12.43		$	12.32


	As of January 31, 2004		As of April 30,
	As of January 31, 2004		2003		2002		2001		2000
Consolidated Balance Sheet Data (in thousands):
Cash and cash equivalents	$	8,403	$	1,543	$	2,312	$	1,017	$	2,227
Working capital		32,226		11,263		20,607		6,837		13,623
Total assets		658,657		661,901		617,799		574,838		562,778
Long-term debt		—		—		—		—		—
Stockholder’s equity		602,665		612,136		571,003		528,479		517,529

(1)

(2)	Selling, general and administrative expenses for the nine months ended January 31, 2004 included an $8.9 million charge associated with a litigation settlement.

(3)	During 2002, we completed our acquisition of TSA, which affected our results of operations as discussed in Note 9 to our consolidated financial statements.

(4)

On January 1, 2002, we adopted the non-amortization provisions of SFAS No. 142. Accordingly, our results of operations before January 1, 2002 reflect the amortization of goodwill and indefinite-lived intangible assets, while our results of operations after January 1, 2002 do not reflect this amortization. See Note 2 to our consolidated financial statements for a discussion of our results of operations during the fiscal years ended 2002 and 2001 after applying the non-amortization provisions of SFAS No. 142.

(5)	Based on total shares, or total shares on a diluted basis, expected to be outstanding subsequent to the initial public offering for all periods presented.

(6)	Calculated as tax preparation revenue and related fees received by franchisees divided by the number of tax returns prepared by franchisees. We earn royalty and advertising revenue based on revenue received by our franchisees.

(7)	Calculated as tax preparation revenue and related fees received by company-owned offices divided by the number of tax returns prepared by company-owned offices.

(8)	Calculated as total royalty and advertising fees received from franchisees divided by total tax preparation revenue and related fees received by franchised offices.

(9)	Calculated as total financial product fees divided by the number of financial products.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our selected consolidated financial data and our consolidated financial statements and the related notes included elsewhere in this prospectus.

Overview

Revenue that we earn consists of the following components:

Royalty and advertising revenue: We earn royalty and advertising revenue from our franchisees. Our franchise agreements require franchisees to pay us a royalty fee of 15% of their revenue (12% for most franchises that joined our system before 2000) and an advertising fee of 6% of their revenue. In 2003, our average royalty and advertising rate was 18.6%. We recognize royalty and advertising revenue upon the reporting of the revenue related to completion of tax returns prepared by our franchisees.

Service revenue: Service revenue includes only revenue earned at our company-owned offices, primarily consisting of fees that we earn directly from our customers for the preparation of tax returns. Service revenue have become a significant portion of our total revenue since our acquisition of TSA in 2002. We recognize service revenues upon the completion of tax returns prepared at our company-owned offices.

Financial product fees: We earn fixed fees from the financial institutions that provide our financial products for the facilitation of the sale of tax refund-based financial products to our customers, including refund anticipation loans, accelerated check refunds and assisted direct deposits. The fixed fees that we earn from the financial institutions originate from a handling fee paid by the customer to the financial institution upon approval and funding of the respective products. We earn a portion of the total handling fee depending upon the product facilitated, with the fees that we earn varying in amounts up to $14.55 per product. These financial products are offered pursuant to our contractual arrangements with financial institutions. We recognize revenue for the fixed fees we earn at the time financial products are sold. In addition, our network offers other products which include the Jackson Hewitt CashCard and our Gold Guarantee extended warranty product. Revenues from our Gold Guarantee product are deferred and recognized over the term of the extended warranty.

Other financial product revenue: In addition to the fixed fees we earn from the facilitation of refund anticipation loans, we earn revenue equal to a portion of the difference between finance fees paid by customers to the financial institutions and loan amounts that the financial institutions are unable to collect. The finance fee is calculated as a percentage of the total loan amount (subject to a minimum and maximum fee). The finance fees are set aside as a reserve against uncollected loans. Other financial product revenue is recognized only to the extent that

the reserves maintained by the lending financial institutions exceed the uncollected loans made by these financial institutions at the end of each reporting period. Other financial product revenue has varied over the past three years based upon the financial institutions ability to manage credit risk and collect loan balances either through the remittance of refunds from the IRS or from the customer.

To reduce the variability of revenue that we have historically recognized, we are currently negotiating with our primary provider of refund anticipation loans, Santa Barbara Bank & Trust, to amend our existing agreement on a prospective basis. In lieu of sharing revenue based upon the amount of finance fees and uncollected loans, the new agreement is expected to result in us earning primarily a fixed fee based upon the number of refund anticipation loans facilitated, similar to the other fixed fees we earn for the facilitation of refund anticipation loans and other financial products.

Other revenue: Other revenue consists of ancillary fees we earn from franchisees, including a $2 fee per tax return paid by franchisees for the processing of each electronically-transmitted tax return. We recognize revenue from the processing fees we earn at the time the tax returns are processed. Approximately 89% of all tax returns filed by our network are filed electronically. Other revenue also includes revenues that we earn from the sale or transfer of territories. Revenue is recognized when all material services or conditions relating to the sale have been performed (generally upon completion of a mandatory training program).

We manage and evaluate the operating results of our business in two segments:

Franchise operations: This segment consists of the operations of our franchise business, including royalty and advertising revenue, financial product fees, other financial product revenue and other revenue.

Company-owned office operations: This segment consists of the operations of our company-owned offices for which we earn service revenue for the preparation of tax returns and related services.

Set forth below is an overview of our consolidated results of operations followed by a more detailed discussion of each of our business segments, as well as a detailed discussion of certain corporate and other expenses.

Consolidated Results of Operations


	Nine Months Ended January 31,						Fiscal Year Ended April 30,
	2004			2003			2003			2002			2001
Business drivers:
Offices:
Franchise operations		4,295			3,776			3,776			3,385			3,345
Company-owned office operations		642			523			523			440			—

Total system		4,937			4,299			4,299			3,825			3,345


Tax returns (in thousands):
Franchise operations		944			804			2,461			2,200			2,212
Company-owned office operations		135			115			365			325			—

Total system		1,079			919			2,826			2,525			2,212


Average revenue per tax return:
Franchise operations(1)	$	144.44		$	139.00		$	139.67		$	130.76		$	113.58
Company-owned office operations(2)	$	155.36		$	144.19		$	132.66		$	126.93			—
Total system	$	145.81		$	139.65		$	138.77		$	130.26		$	113.58

Average franchise royalty and advertising rate(3)		18.68	%		18.59	%		18.59	%		18.39	%		18.21	%
Financial products (in thousands)		860			719			2,396			1,906			1,337
Average financial product fees(4)	$	13.52		$	12.82		$	10.45		$	11.35		$	12.43

Operating results (in thousands):
Revenues:
Royalty and advertising revenue	$	25,470		$	20,778		$	63,900		$	52,901		$	45,749
Service revenue from company-owned operations		20,995			16,580			48,420			41,252			—
Financial product fees		11,624			9,216			25,037			21,635			16,618
Other financial product revenue		6,678			5,554			23,110			29,518			3,447
Other		8,077			6,886			11,080			11,685			9,691

Net revenues		72,844			59,014			171,547			156,991			75,505


Expenses:
Operating		38,911			32,065			53,155			37,208			12,861
Marketing and advertising		18,334			15,563			25,086			18,836			13,474
Selling, general and administrative		22,660			11,648			14,997			17,882			13,955
Depreciation and amortization		8,941			8,478			11,523			12,824			13,990

Total expenses		88,846			67,754			104,761			86,750			54,280

Income (loss) from operations		(16,002	)		(8,740	)		66,786			70,241			21,225

Other income:
Interest income, net		287			671			791			1,449			1,842
Preferred stock dividends from TSA		—			—			—			1,768			1,181

Income (loss) before income taxes		(15,715	)		(8,069	)		67,577			73,458			24,248
Provision for (benefit from) income taxes		(6,244	)		(3,154	)		26,444			30,935			13,298

Net income (loss)	$	(9,471	)	$	(4,915	)	$	41,133		$	42,523		$	10,950

(1)	Calculated as tax preparation and related fees received by franchisees divided by the number of tax returns prepared. We earn royalty and advertising revenue based on revenue received by our franchisees.

(2)	Calculated as tax preparation revenue and related fees received by company-owned offices divided by the number of tax returns prepared by company-owned offices.

(3)	Calculated as total royalty and advertising fees received from franchises divided by total tax preparation revenue and related fees received by franchised offices.

(4)	Calculated as total financial product fees divided by the number of financial products.

Nine Months Ended January 31, 2004 as Compared to the Nine Months Ended January 31, 2003

Because our business is seasonal, we have historically incurred losses through the first eight months of each fiscal year and earned the majority of our revenue and net income during the fourth quarter. Because the tax season is relatively short and straddles the period ending January 31, trends comparing the nine months ending January 31 to the same period in the prior year are not necessarily reflective of overall trends in the business.

The number of tax returns prepared within our network increased by 17%, and the average revenue per tax return including both franchised and company-owned offices increased by 4% for the nine months ended January 31, 2004 compared to the same period in the prior year. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily as a result of annual price adjustments. Growth in tax returns prepared by our network for the period ended January 31, 2004 was higher due in part to the inclusion of an additional Saturday in the period as compared to the same period in the prior year. The inclusion of an additional Saturday resulted in adding one of our largest days in terms of the number of tax returns prepared to the period ending January 31 as compared to this day falling in February in the prior year. Adjusting for this impact, the increase in the number of tax returns prepared within our network would have been 6%.

In conjunction with the growth in tax returns prepared and financial products facilitated, net revenues increased $13.8 million, or 23%, for the nine months ended January 31, 2004 as compared to the same period in the prior year, which included an increase of $9.4 million, or 22%, in our franchise operations revenue and an increase of $4.4 million, or 27%, in our company-owned office operations revenue.

Total expenses increased by $21.1 million, or 31%, primarily due to increased costs of $7.5 million in our franchise operations segment, which included higher personnel costs to support franchisees, and $3.6 million in our company-owned office operations due primarily to the growth in the number of our offices. Marketing and advertising costs increased in conjunction with our growth, as we began to market our services at the beginning of the tax season. The increase also included an $8.9 million charge associated with a litigation settlement in connection with an action filed by 154 of our franchisees against us and Santa Barbara Bank & Trust alleging, among other things, that we breached an agreement with them by not paying them a portion of other financial product revenue. The $8.9 million charge reflects the total amount we expect to incur related to this settlement. Management is not aware of any other similar proceedings or actions.

Net loss increased to $9.5 million for the nine months ended January 31, 2004 from a net loss of $4.9 million for the same period in the prior year. Excluding the impact of the litigation settlement, the net loss decreased from $4.9 million for the nine months ended January 31, 2003 to approximately $4.1 million in the same period for the following year.

Fiscal Year Ended April 30, 2003 as Compared to the Fiscal Year Ended April 30, 2002.

The number of tax returns prepared by our network increased by 12% and the average revenue per tax return including both franchised and company-owned offices increased by 7% in 2003, as compared to the prior year. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily as a result of annual price adjustments.

In conjunction with the growth in tax returns prepared and financial products facilitated, net revenues increased $14.6 million, or 9%, for 2003 as compared to the prior year. This increase was

primarily due to an $11.0 million, or 21%, increase in royalty and advertising revenue in our franchise operations, a $7.2 million, or 17%, increase in service revenue at company-owned offices, and a $3.4 million, or 16%, increase in financial product fees. The increase in net revenues was partially offset by a $6.4 million, or 22%, decrease in other financial product revenue primarily as a result of lower collections on refund anticipation loans. Due to the timing of the TSA acquisition and the seasonality of our business, if TSA had been acquired on May 1, 2001, net revenues in 2002 would have been $156.9 million.

Expenses increased as a percentage of revenue to 61% for 2003 from 55% in the prior year, primarily due to the timing of our acquisition of TSA on January 18, 2002. If TSA had been acquired on May 1, 2001, expenses in 2002 would have been $109.6 million, or 70%, of net revenue. Adjusting for the impact of the acquisition, expenses decreased as a percentage of net revenues primarily due to revenue growth and the benefit of a larger revenue base over fixed expenses.

Net income decreased to $41.1 million in 2003 from $42.5 million in 2002 primarily due to the impact of the acquisition of TSA. If TSA had been acquired on May 1, 2001, net income would have been $28.2 million in 2002.

Fiscal Year Ended April 30, 2002 as Compared to the Fiscal Year Ended April 30, 2001

The number of tax returns prepared within our network increased by 14% and the average revenue per tax return including both franchised and company-owned offices increased by 15% in 2002, as compared to the prior year. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily due to increases in related fees received, by both franchised and company-owned offices, associated with proportionately higher growth in the number of financial products facilitated.

Net revenues increased $81.5 million, or 108%, for 2002 as compared to the prior year. This increase was primarily due to a $7.2 million, or 16%, increase in royalty and advertising revenues in our franchise operations, a $41.3 million increase in service revenues at company-owned offices due to our acquisition of TSA on January 18, 2002, and a $5.0 million, or 30%, increase in financial product fees. The growth in net revenues was further impacted by a $26.1 million increase in other financial product revenue primarily as a result of higher collections on refund anticipation loans made by financial institutions. The operating results of TSA are included in our results of operations from the acquisition date forward (for three and a half months ended April 30, 2002).

Expenses decreased as a percentage of revenue to 55% for 2002 from 72% for the prior year due to a substantial increase in other financial product revenue and the acquisition of TSA. Our company-owned office operations contributed lower profits as a percentage of revenue, contributing $41.3 million of revenue and $18.9 million of income before taxes in 2002. Due to the timing of the TSA acquisition and the seasonality of our business, if TSA had been acquired on May 1, 2001, company-owned office operations would have contributed $42.3 million of net revenue and a net loss before income taxes of $2.9 million, primarily due to higher expenses associated with the integration of prior period acquisitions and higher infrastructure expenses. By comparison, our franchise operations contributed $115.7 million of revenue and $65.3 million of income before taxes in 2002. If TSA had been acquired on May 1, 2001, expenses as a percentage of revenue would have been 70% as of April 30, 2002.

Net income increased by $31.6 million for 2002 as compared to the prior year primarily due to the increase in other financial product revenue and the impact of the TSA acquisition. Net income would have increased by $17.3 million if the TSA acquisition had occurred on May 1, 2001.

Franchise Operations

At the core of our business strategy is the growth and development of our franchise system. We derive a significant portion of our revenue from royalty and advertising fees which are also our fastest growing source of revenue. In 2003, revenues from royalty and advertising fees were $63.9 million, an increase of approximately 21% compared to 2002. We earn royalty fees based on our franchisees’ revenue. We provide our franchisees with services designed to increase their revenues, including training, administrative support, access to our proprietary ProFiler tax return preparation software and tax refund-related financial products, product development and quality assurance. Advertising fees are based on our franchisees’ revenue and are used to support national advertising programs, brand development, website development and our franchisees’ regional and local advertising.


	Nine Months Ended January 31,						Fiscal Year Ended April 30,
	2004			2003			2003			2002			2001
Business drivers:
Offices		4,295			3,776			3,776			3,385			3,345
Tax returns (in thousands)		944			804			2,461			2,200			2,212
Average revenue per tax return(1)	$	144.44		$	139.00		$	139.67		$	130.76		$	113.58

Average franchise royalty and advertising rate (2)		18.68	%		18.59	%		18.59	%		18.39	%		18.21	%
Financial products (in thousands)		860			719			2,396			1,906			1,337
Average financial product fee per product(3)	$	13.52		$	12.82		$	10.45		$	11.35		$	12.43

Operating results (in thousands):
Revenues:
Royalty and advertising revenue	$	25,470		$	20,778		$	63,900		$	52,901		$	45,749
Financial product fees		11,624			9,216			25,037			21,635			16,618
Other financial product revenue		6,678			5,554			23,110			29,518			3,447
Other		8,077			6,886			11,080			11,685			9,691

Net revenues		51,849			42,434			123,127			115,739			75,505


Expenses:
Operating		17,927			13,745			18,971			19,511			12,861
Marketing and advertising		15,074			12,346			20,631			16,353			13,474
Selling, general and administrative		3,265			2,947			3,365			4,362			3,739
Depreciation and amortization		5,709			5,419			7,274			11,626			13,990

Total expenses		41,975			34,457			50,241			51,852			44,064

Income from operations		9,874			7,977			72,886			63,887			31,441
Interest income, net		549			671			791			1,449			1,842

Income before income taxes	$	10,423		$	8,648		$	73,677		$	65,336		$	33,283

(1)	Calculated as tax preparation revenue and related fees received by franchisees divided by the number of tax returns prepared by our franchised offices. We earn royalty and advertising revenue based on revenue received by our franchisees.

(2)	Calculated as total royalty and advertising fees received from franchises divided by total tax preparation revenue and related fees received by franchised offices.

(3)	Calculated as the total financial product fees divided by the number of financial products.

Nine Months Ended January 31, 2004 as Compared to the Nine Months Ended January 31, 2003

The average number of offices per territory increased from 1.7 at January 31, 2003 to 1.8 at January 31, 2004.

Because the tax season is relatively short and straddles the period ending January 31, trends comparing the nine months ending January 31 to the same period in the prior year are not necessarily reflective of overall trends in the business.

Royalty and advertising revenue increased by $4.7 million, or 23%, during the nine months ended January 30, 2004 as compared to the same period in 2003. This increase resulted from a 17% increase in the number of tax returns prepared and a 4% increase in the average revenue per tax return. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily as a result of annual price adjustments. We also benefited from a slight increase in the average royalty and advertising rate we earn as the network included more territories at the 15% royalty fee rate, which increased to 18.7% for the nine months ended January 31, 2004 from 18.6% for the nine months ended January 31, 2003. Growth in tax returns prepared by our network for the period ended January 31, 2004 was higher due in part to the inclusion of an additional Saturday in the period as compared to the equivalent period in the prior year. The inclusion of an additional Saturday resulted in adding one of our largest days in terms of the number of tax returns prepared to the period ending January 31 as compared to this day falling in February in the prior year. Adjusting for this impact, the increase in the number of tax returns prepared within our network would have been 6%.

Financial product fee revenue increased by $2.4 million, or 26%, for the nine months ended January 31, 2004 as compared to the same period in 2003. Growth in the number of tax returns prepared contributed to a 20% increase in the number of financial products facilitated for the nine months ended January 31, 2004 as compared to the same period in 2003. For the nine months ended January 31, 2004, we facilitated the sale of approximately 860,000 financial products as compared to 719,000 financial products for the nine months ended January 31, 2003. These sales included 478,000 refund anticipation loans for the nine months ended January 31, 2004 as compared to 403,000 refund anticipation loans for the same period in the prior year. We earned total fees in connection with our facilitation of the sale of refund anticipation loans of $6.9 million for the nine months ended January 31, 2004 as compared to $5.8 million for the same period in the prior year. We recognized a 6% increase in the average fee per financial product, which was primarily the result of increased pricing for refund-based products.

Other financial product revenue increased by $1.1 million, or 20%, during the nine months ended January 31, 2004 as compared to the same period in 2003 due to higher collections of loans from prior tax seasons.

For the nine months ended January 31, 2004, total expenses increased by 22% as compared to the nine months ended January 31, 2003, principally due to an increase in operating expenses and marketing and advertising expenses. Operating expenses increased primarily due to costs related to increased personnel to support franchisees and expense attributable to growth in the Gold Guarantee program. We invested additional funds in marketing and advertising in 2004 as we continued to increase the awareness of our brand to drive new customer growth. Selling, general and administrative expenses, as well as depreciation and amortization, grew at modest rates for the nine months ended January 31, 2004 as compared to the same period in 2003.

Income before income taxes increased by $1.8 million, or 21%, for the nine months ended January 31, 2004 as compared to the same period in the prior year.

Fiscal Year Ended April 30, 2003 as Compared to the Fiscal Year Ended April 30, 2002

The number of franchised offices grew by 12% from 3,385 offices at April 30, 2002 to 3,776 offices at April 30, 2003.

Royalty and advertising revenue increased by $11.0 million, or 21%, during 2003 as compared to 2002. This increase resulted from a 12% increase in the number of tax returns prepared in our franchise system and a 7% increase in the average revenue per tax return, both for 2003 as compared

to 2002. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily as a result of annual price adjustments. Additionally, the average royalty and advertising rate that we earned from our franchisees increased slightly to 18.6% in 2003 from 18.4% in 2002.

Financial product fee revenue increased by $3.4 million, or 16%, during 2003 as compared to 2002 primarily due to the increase in the number of tax returns prepared and the facilitation of higher financial product sales. We facilitated the sale of nearly 2.4 million financial products in 2003 as compared to 1.9 million financial products in the prior year, an increase of 26%. Facilitation of the sales of refund-based financial products increased by approximately 196,000 in 2003 as compared to 2002, while sales of our Gold Guarantee product accounted for approximately 285,000 of the year-to-year increase. Our financial product sales included approximately 975,000 refund anticipation loans in 2003 as compared to approximately 809,000 refund anticipation loans in 2002, and we earned total fees of $14.1 million in 2003 as compared to $12.0 million in the prior year. Because sales of our Gold Guarantee product are recognized over the warranty period and grew at a disproportionately high rate, the average revenue per financial product declined by 8%.

Other financial product revenue decreased by $6.4 million, or 22%, in 2003 principally due to lower collection rates for our refund anticipation loan program.

Total expenses declined to 41% of revenue in 2003 from 45% in the prior year primarily due to the benefits of a larger revenue base over fixed expenses. Total expenses decreased by 3% in 2003 as compared to the prior year primarily due to a decrease in amortization following our adoption of Statement of Financial Accounting Standards No. 142 on January 1, 2002, which eliminated the amortization of goodwill and other indefinite-lived intangible assets, as well as reductions in selling, general and administrative costs that were partially offset by increases in marketing and advertising costs.

Income before income taxes increased by $8.3 million, or 13%, in 2003 as compared to the prior year.

Fiscal Year Ended April 30, 2002 as Compared to the Fiscal Year Ended April 30, 2001

Our results for 2001 reflect royalty and advertising revenue earned from TSA. Subsequent to our acquisition of TSA in January 2002, TSA’s results are reflected in our company-owned office operations segment. To the extent that our results are impacted by the acquisition of TSA, the effects are separately discussed below.

The number of franchised offices increased by 1% in 2002 as compared to the prior year due to the fact that TSA was included as a franchisee in 2001. Excluding the impact of TSA, the number of franchised offices increased by 11%, from 3,045 in 2001 to 3,385 for 2002.

Royalty and advertising revenue increased by $7.2 million, or 16%, in 2002 as compared to the prior year primarily due to a 15% increase in the average revenue per tax return. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily due to increases in related fees received by franchised offices associated with proportionately higher growth in the number of financial products facilitated. Excluding the impact of the acquisition of TSA, the number of tax returns prepared increased by 259,000, or 13%, and our royalty and advertising revenue increased $12.4 million, or 31% in 2002 as compared to the prior year.

Financial product fee revenue increased by $5.0 million, or 30%, in 2002 as compared to the prior year. The increase was driven by a 43% increase in the total number of financial products sales that

we facilitated in 2002 as compared to the prior year, which primarily resulted from proportionately higher sales of refund-based financial products, growing to approximately 1.9 million financial product sales in 2002 from approximately 1.3 million product sales in the prior year. Financial product sales included approximately 809,000 refund anticipation loans in 2002 as compared to approximately 604,000 for the prior year, and we earned total fees of $12.0 million in 2002 as compared to $8.0 million for the prior year. Average fee per financial product decreased by 9% primarily due to the introduction of our Gold Guarantee product for which the revenue for the product is recognized over the warranty period.

Other financial product revenue increased by $26.1 million in 2002 as compared to the prior year due to a 34% increase in the number of refund anticipation loans and a substantial increase in collections by the financial institutions that provide our financial products.

Total expenses for 2002 decreased to 45% of revenue as compared to 58% in the prior year. The decrease was primarily due to the benefits of a larger revenue base over fixed expenses and higher revenue for other financial products. Expenses also included approximately $1.1 million related to the hiring and relocation of our software development and maintenance team.

Income before income taxes increased $32.1 million in 2002 as compared to the prior year.

Company-Owned Office Operations

Complementing our franchise system are our company-owned offices. Prior to our acquisition of TSA on January 18, 2002, we did not have significant company-owned office operations. Increases in revenues and earnings of our company-owned offices are derived from our operations and through our acquisition of independent tax return preparation businesses. Tax returns filed by our company-owned offices represented 13% of the total tax returns filed within the Jackson Hewitt network in 2003.


	Nine Months Ended January 31,						Fiscal Year Ended April 30,
	2004			2003			2003		2002
Business drivers:
Offices		642			523			523		440
Tax returns (in thousands)		135			115			365		325
Average revenue per tax return(1)	$	155.36		$	144.19		$	132.66	$	126.93

Operating results (in thousands):
Service revenue from company-owned operations	$	20,995		$	16,580		$	48,420	$	41,252


Expense:
Operating		20,984			18,320			34,184		17,697
Marketing and advertising		3,260			3,217			4,455		2,483
Selling, general and administrative		2,324			1,572			2,435		937
Depreciation and amortization		3,232			3,059			4,249		1,198

Total expenses		29,800			26,168			45,323		22,315

Income (loss) before income taxes	$	(8,805	)	$	(9,588	)	$	3,097	$	18,937

(1)	Calculated as service revenue from company-owned operations, which includes tax preparation and related fees, divided by the number of tax returns prepared.

Nine Months Ended January 31, 2004 as Compared to the Nine Months Ended January 31, 2003

The number of tax returns grew by 18% in the nine months ended January 31, 2004 as compared to the same period in 2003, and average revenue per tax return increased by 8%, which contributed to an increase of 27% in revenue. Growth in tax returns prepared by our network for the period ended January 31, 2004 was higher due in part to the inclusion of an additional Saturday in the period as compared to the equivalent period in the prior year. The inclusion of an additional Saturday resulted in adding one of our largest days in terms of the number of tax returns prepared to the period ending January 31 as compared to this day falling in February in the prior year. Adjusting for this impact, the increase in the number of tax returns prepared within our network would have been 5%. Our number of new offices increased by 119, or 23%, for the nine months ended January 31, 2004. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily as a result of annual price adjustments.

Operating expenses increased by 15% for the nine months ended January 31, 2004 as compared to the same period in the prior year in conjunction with the growth in tax returns. Operating expenses included direct labor, rent, and other direct costs related to the operation of our company-owned offices. Investments in training and support infrastructure contributed to a 48% increase in selling, general and administrative expenses. Our results also reflect an allocation for marketing and advertising spending relative to company-owned office operations revenue as a percentage of total network revenue. Our company-owned operations incur losses through the first three quarters of each year given the seasonality of our business with most of our revenue being earned during the fourth quarter.

Loss before income taxes decreased $783,000, or 8%, in the nine months ended January 31, 2004 as compared to the prior year.

Fiscal Year Ended April 30, 2003 as Compared to the Fiscal Year Ended April 30, 2002

We acquired TSA on January 18, 2002. Prior to the acquisition, TSA was our largest franchisee for which we earned royalty and advertising revenue.

The number of tax returns prepared grew by 12% in 2003 as compared to the prior year and average revenue per tax return increased by 5%, which contributed to an increase of 17% of revenue. Because most of our revenue is earned from January through April, the timing of the TSA acquisition did not have a significant impact on the total revenue earned. Our number of new offices increased by 83, or 19%, in 2003. Average revenue per tax return is calculated as tax preparation and related fees received divided by the total number of tax returns prepared. Average revenue per tax return increased primarily as a result of annual price adjustments.

Total expenses increased primarily as a result of the inclusion of TSA in our consolidated results for the full fiscal year in 2003 as compared to the inclusion of TSA in our consolidated results for only three and one half months in 2002. Due to the timing of the TSA acquisition and the seasonality of our business, if TSA had been acquired on May 1, 2001, expenses would have been $45.2 million in 2002. As a percentage of revenues, expenses would have decreased from 107% in 2002, if TSA had been acquired on May 1, 2001, to 94% in 2003, primarily as a result of growing revenues over a fixed cost base.

Income before income taxes decreased $15.8 million in 2003 as compared to the prior year. If TSA had been acquired on May 1, 2001, income before income taxes would have increased by $6.0 million.

Corporate and Other

Corporate and other expenses consist of corporate functions, including legal, finance, strategic development activities and other costs which are not allocated to our franchise operations or company-owned office operations, as well as certain unusual expenses such as litigation costs.


	Nine Months Ended January 31,						Fiscal Year Ended April 30,
	2004			2003			2003			2002			2001
	(in thousands)
General and administrative expense	$	17,071		$	7,129		$	9,197		$	12,583		$	10,216

Loss from operations		(17,071	)		(7,129	)		(9,197	)		(12,583	)		(10,216	)
Interest expense		(262	)		—			—			—			—
Other income		—			—			—			1,768			1,181

Loss before income taxes	$	(17,333	)	$	(7,129	)	$	(9,197	)	$	(10,815	)	$	(9,035	)

Nine Months Ended January 31, 2004 as Compared to the Nine Months Ended January 31, 2003

Loss before income taxes increased $10.2 million primarily due to an $8.9 million charge recorded in connection with the franchisee litigation settlement in connection with an action filed by 154 of our franchisees against us and Santa Barbara Bank & Trust alleging, among other things, that we breached an agreement with them by not paying them a portion of other financial product revenue. The $8.9 million charge reflects the total amount we expect to incur related to this settlement.

Fiscal Year Ended April 30, 2003 as Compared to the Fiscal Year Ended April 30, 2002

Loss before income taxes decreased $1.6 million, or 15%, primarily due to a reduction in general and administrative expenses primarily resulting from costs incurred in 2002 to close our Virginia Beach facility. This reduction was partially offset by the absence in 2003 of $1.8 million of preferred stock dividends (other income) received prior to our acquisition of TSA. Management is not aware of any similar proceedings or actions.

Fiscal Year Ended April 30, 2002 as Compared to the Fiscal Year Ended April 30, 2001

Loss before income taxes increased $1.8 million, or 20%, primarily due to $1.6 million of costs incurred during 2002 to close our Virginia Beach facility, which was partially offset by an increase of $587,000 in preferred stock dividends (other income) received prior to our acquisition of TSA.

Seasonality and Quarterly Results of Operations

Given the seasonal nature of the tax preparation business, we have generated and expect to continue to generate substantially all our revenues during the tax season period from January through April of each year, which will overlap our third and fourth quarters. During 2003, we generated approximately 92% of our revenues during this period. We generally operate at a loss through the first eight months of each fiscal year, during which we incur costs associated with preparing for the upcoming tax season.

The following table presents certain unaudited quarterly consolidated statements of operations data for each of our last eight fiscal quarters. In the opinion of our management, this quarterly information has been prepared on the same basis as the consolidated financial statements appearing elsewhere in this prospectus and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the unaudited quarterly results set forth herein. Our quarterly results have in the past been subject to fluctuations, and thus, the operating results for any quarter are not necessarily indicative of results for a full year. In addition, these results may not be indicative of results that would have existed or resulted if we had operated independently of Cendant.


	Fiscal Quarter Ended									Fiscal Quarter Ended
	April 30, 2004	Jan. 31, 2004		Oct. 31, 2003			July 31, 2003			April 30, 2003		Jan. 31, 2003		Oct. 31, 2002			July 31, 2002
	(in thousands)
Net revenues	$	$	59,528	$	7,544		$	5,772		$	112,533	$	48,617	$	4,566		$	5,831
Net income (loss)	$	$	7,161	$	(5,345	)	$	(11,287	)	$	46,048	$	7,921	$	(5,983	)	$	(6,853	)

Refund Anticipation Loan Risk-Sharing

We facilitate the sale of refund anticipation loans pursuant to agreements with Santa Barbara Bank & Trust and Household Tax Masters Inc. In 2003, approximately 87% of our refund anticipation loans were sold pursuant to our contractual relationship with Santa Barbara. Under these agreements, we share the risks of non-collection on refund anticipation loans. If actual loan losses exceed anticipated loan losses in a given year, we are obligated to reimburse these financial institutions for a majority of the deficit. Conversely, if actual loan losses are less than anticipated, we receive a majority of the surplus. We have experienced considerable variability in the amount of revenue we earned.

Separation from Cendant and Related Transactions

Upon completion of this offering, we will enter into a transitional services agreement and a sublease agreement for our corporate New Jersey headquarters with Cendant to provide for an orderly transition to being an independent company and to govern continuing arrangements between us and Cendant. Under the transitional services agreements, Cendant will agree to provide us with various services, including services relating to facilities, human resources and employee benefits, payroll, financial systems management, treasury and cash management, accounts payable services, tax support, event marketing, revenue audit services, telecommunications, information technology, call support services and public and regulatory affairs. The transitional services agreement will also contain agreements relating to indemnification, tax sharing and tax indemnification, access to information and non-solicitation of employees.

The majority of the services to be covered in the transitional services agreement will expire by December 31, 2005, with the exception of information technology services and telecommunication services, which will expire in two years and three years, respectively, from the date of this offering. We do not expect any of the services to be provided under these agreements to expire before December 31, 2004. Additionally, all of the services to be provided under the transitional services agreement may be terminated by us, without penalty, upon not less than 30 days prior written notice to Cendant, except for information technology services which will require a termination payment to Cendant in the amount of the unamortized lease costs of computer hardware. For almost all services to be provided, Cendant does not have the ability to terminate the provision of the services prior to the expiration date, with the exception of telecommunications services, revenue audit services and call center support which Cendant may terminate upon 180 days, 120 days, and 120 days, respectively, prior written notice to us. Cendant may terminate the sub-lease for our New Jersey corporate headquarters prior to the

expiration date upon 120 days prior written notice, but Cendant is required to relocate us, at Cendant’s cost, to mutually acceptable office space.

Under the transitional services agreement, the cost of each transitional service will generally reflect the same payment terms and will be calculated using the same cost allocation methodologies for the particular service as those associated with the costs in our historical financial statements. The transitional services agreement is being negotiated in the context of a parent-subsidiary relationship. The provision of many of the services will be transitioned at similar costs to those allocated by Cendant historically. After the expiration of the transitional services agreement, we may not be able to replace these services in a timely manner or on terms and conditions, including cost, as favorable as those we have received from Cendant. We are developing a plan to increase our own internal capabilities to reduce our reliance on Cendant for these services. We expect to incur a substantial increase in costs for the following services: insurance coverage (specifically directors and officers and errors and omissions coverage); financial systems management; and employee benefits. As part of this plan, we have, or will have expanded our accounting and finance team and implemented the necessary systems to manage the transition of these services and handle the additional responsibilities of operating as an independent public company. In addition, we have, or will have expanded our capabilities in other functional areas such as human resources, legal and preferred alliances to enable us to adequately support and provide the services which we have received historically from Cendant. Furthermore, we have engaged an insurance broker that will act as our risk manager, and they are in the process of securing independent insurance coverages on our behalf.

You should refer to the “Certain Relationships and Related Transactions” section of this prospectus and Note 8 to our consolidated financial statements for a description of these and other intercompany agreements and transactions between us and Cendant.

Contractual Obligations

The following table presents our contractual obligations:


	Through April 30, 2004		2005-2006		2007-2008		2009 & thereafter		Total
	(in thousands)
Borrowings	$		$		$		$		$
Operating lease obligations		2,187		10,160		2,876		271		15,494
Transitional services agreements

Total	$	2,187	$	10,160	$	2,876	$	271	$	15,494

Liquidity and Capital Resources

Our revenues have been and are expected to continue to be highly seasonal. As a result, we generate most of our operating funds during the tax season that consists of the period from January through April. Following tax season, we require funds to cover our operating expenses as well as to reinvest in the business for future growth. Subsequent to this offering we will fund our operations through our operating cash flow and through a bank credit facility, as required.

For the nine months ended January 31, 2004, we required approximately $22.3 million to fund operating activities. Operating requirements were approximately $14.3 million higher than for the nine months ended January 31, 2003 due to growth in tax return volume at the beginning of the tax season and a timing difference from when the franchisees filed returns and when they submitted royalties to us. We also invested approximately $9.2 million in the purchase of equipment, the acquisitions of

independent tax preparation businesses and the funding of development advances. We have historically invested in these activities to grow the business and expect to continue to make such investments following each tax season.

With respect to financing activities, Cendant, our parent corporation, has historically received the benefit of our operating cash flow and has funded our operations following the end of the tax season. Consequently, until the consummation of this offering, our financing activities have consisted solely of the settlement of intercompany transactions with Cendant.

Our total current assets as of January 31, 2004 were $62.9 million as compared to $32.2 million as of April 30, 2003. The increase is predominantly due to growth in the business and the increase in receivables from franchisees in conjunction with the beginning of the tax season. Other long-term assets increased with our additional investment in equipment, development advances and financing of new territories. Notes receivable from franchisees are generally four years in duration and are due in annual installments of principal and interest on February 28 of each year. These notes generally bear interest at rates between 8% and 12% and are secured by the underlying franchise and the personal guarantee of the individual owners of each franchise.

Based on our ability to generate profits from our operations and our ability to utilize our revolving credit facility, we believe we have sufficient liquidity and financial resources to fund our operations, including the payment of quarterly dividends and the obligations associated with our new indebtedness.

New Indebtedness

We are currently negotiating with various institutional lenders the terms of a multi-year revolving credit facility that will provide for borrowings of up to $100 million. We expect to enter into this credit facility concurrently with the closing of this offering. Borrowings under the revolving credit facility will be available for general corporate purposes, working capital and potential acquisitions. To the extent we complete any acquisitions, we may require additional debt or equity financing to meet our capital needs.

We anticipate that the credit facility will contain customary covenants for facilities of this type, including covenants restricting the nature and amount of our investments, the total amount of our indebtedness and the payment of dividends. In addition we anticipate that the credit facility will contain customary financial covenants. We anticipate that one or more of our subsidiaries will guarantee our obligations under the credit facility.

Concurrently with the closing of this offering, we also intend to issue $175 million aggregate principal amount of fixed and/or floating rate notes. It is expected that the notes will have a maturity of five years, and the agreements governing the notes will contain customary covenants, event of default provisions and other terms and conditions that are consistent with those contained in similar debt obligations of issuers with a credit quality similar to ours. We intend to use the net proceeds of the notes placement to fund the cash portion of the special dividend to be paid to Cendant concurrently with the closing of this offering.

Our liquidity position may be negatively affected by unfavorable conditions in the market in which we operate. In addition, our inability to generate sufficient profits during tax season may unfavorably impact our funding requirements.

Changes in Accounting Policies and Recently Issued Accounting Pronouncements

Our changes in accounting policies and recently issued accounting pronouncements are reflected in Note 2 to our consolidated financial statements.

Critical Accounting Policy

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. The following accounting policy may affect reported results resulting in variations in our financial results both on an interim and fiscal year end basis.

Goodwill

We have reviewed the carrying value of our goodwill as required by SFAS No. 142, “Goodwill and Other Intangible Assets,” by comparing the carrying value of our reporting units to their fair value and determined that the carrying amount of our reporting units did not exceed their respective fair value. When determining fair value, we utilized various assumptions, including projections of future cash flows. A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause fair value to be less than the respective carrying amount. In such event, we would then be required to record a charge, which would impact earnings. We will continue to review the carrying value of goodwill for impairment annually, or more frequently if circumstances indicate impairment may have occurred. An adverse change to our business will impact our consolidated results and may result in an impairment of our goodwill. The aggregate carrying value of our goodwill was approximately $393 million at January 31, 2004. See Note 4 to our consolidated financial statements for more information on goodwill.

BUSINESS

Overview

Jackson Hewitt is the second largest paid tax return preparer in the United States based on the number of tax returns filed by paid preparers, with a nationwide network comprised of 4,295 franchised offices and 642 company-owned offices as of January 31, 2004. We have grown rapidly, more than doubling the number of offices in our network since 1998 and our annual volume of tax returns prepared since 1999. Despite our growth and industry position, the 2.8 million tax returns our network prepared in 2003 represented less than 4% of the total paid tax return preparer industry in the United States.

In 2003, our net revenues were $171.5 million, which were generated primarily from three sources: royalty and advertising fees paid by our franchisees (37% of net revenues), service revenue including tax return preparation and related service fees provided at company-owned offices (28% of net revenues) and fees and other revenue received from financial institutions in connection with our facilitation of the sale of financial products (28% of net revenues). Because of the higher profit margins inherent in the franchise model, our franchise revenues contribute a disproportionately higher percentage of our income from operations than those of our company-owned offices.

At the core of our business strategy is the growth and development of our franchise system. Royalty and advertising fees are our largest and fastest growing source of revenue. In 2003, revenue from royalty and advertising fees were $63.9 million, an increase of approximately 21% compared to 2002. We earn royalty and advertising fees based on our franchisees’ revenue, for which we provide support and services, as well as national and regional advertising programs, designed to increase their revenues. Our franchise model enables us to grow more quickly with less capital investment and lower operating expenses than if we directly operated all of the offices in our network. Tax returns filed by our franchised offices represented 87% of the total number of tax returns filed by the Jackson Hewitt network in 2003.

Complementing our franchise system are our company-owned offices. Increases in revenues and earnings of our company-owned offices are derived from growth in our operations and through our acquisition of independent tax return preparation businesses. Service revenue from our company-owned offices was $48.4 million in 2003, an increase of approximately 17% compared to 2002. Company-owned offices provide us with the opportunity to demonstrate the benefits of new products and develop and implement new initiatives that may be made available to our franchise system. Tax returns filed by our company-owned offices represented 13% of the total tax returns filed by the Jackson Hewitt network in 2003.

Annual tax refunds represent an important source of funds for many of our customers. As a result, they typically file their tax returns early in the tax season, shortly after W-2s are available in order to receive their tax refunds as quickly as possible. In 2003, approximately 74% of our customers filed their tax returns by the end of February. We refer to these customers as early-season filers. To meet the needs of early-season filers, we provide convenient tax return preparation services and electronic filing of tax returns, and we facilitate the sale of financial products that accelerate the availability of funds to them.

Additionally, we earn revenues from financial institutions in connection with our facilitation of the sale of financial products to our customers. In 2003, our customers purchased nearly 2.4 million financial products in conjunction with having their tax returns prepared by us, approximately 26% more than in 2002. The substantial majority of our financial product revenues comes from fees and other revenue related to refund anticipation loans and accelerated check refunds provided by financial

institutions to our customers. These products enable customers to have access to funds more quickly than if they filed their tax returns on their own and waited to receive a tax refund directly from the IRS. These products also enable customers to have their tax returns prepared by trained preparers with no cash outlay at the time of filing. We continue to develop and offer additional products designed to attract and retain customers and generate incremental revenue. Since 2000, we have introduced a number of financial products, including the Jackson Hewitt CashCard^®, HELP^SM, Gold Guarantee^® and Money Now^SM.

Industry Overview

According to the IRS, approximately 131 million individual tax returns were filed in 2003. Of these tax returns, approximately 59%, or 77 million tax returns, were prepared with the help of a paid tax return preparer. According to the IRS, the percentage of tax returns prepared by paid tax return preparers has increased over time to 59% in 2003. H&R Block is the largest paid tax return preparer, with an approximate 21% share, and Jackson Hewitt is the second largest, with less than a 4% share. We believe that no other preparer has greater than a 1% share. Excluding H&R Block and us, the paid tax return preparer industry, representing approximately 58 million annual tax returns, is highly fragmented and consists of tens of thousands of paid tax return preparers, including national and regional tax return preparation services, accountants, attorneys, small independently-owned companies and financial service institutions that prepare tax returns as an ancillary part of their business. We believe we are well positioned to increase our share of the paid tax return preparer segment because of our strong brand name, our franchise model, our electronic filing capability and our ability to offer our customers fast and convenient means of obtaining funds associated with their tax refunds.

The increasing use of electronically-filed tax returns has been a significant development for taxpayers and the tax return preparation industry. To reduce administrative costs, the IRS has set a target of increasing the number of tax returns filed electronically to 80% by 2007. In 2003, 44% of tax returns were filed electronically. Our network filed 89% of our tax returns electronically in 2003, making us a leader in this area. We believe that taxpayers have an incentive to file electronically because of the associated benefits, including acknowledgment of receipt of the filing, better accuracy and faster refund processing.

The industry has also benefited from year-over-year price increases. Our average revenue per customer has grown at a compound annual growth rate of 7% since 1999, which we believe is similar to pricing growth in the overall industry.

Customer Segments

The table below shows the breakdown of tax returns filed in 2003 by adjusted gross income, or AGI, for all individual tax returns in the United States and tax returns filed by us.


	Total U.S. Individual Tax Returns		Tax Returns Filed by Jackson Hewitt
Less than $29,999	53	%	73	%

$30,000 to $49,999	19		16

$50,000 or more	28		11


Total	100	%	100	%

We segment our customers based on whether they file their tax return in the early season or late season. In 2003, approximately 41% of all tax returns filed with the IRS were filed between January 1st

and the end of February, representing the early-season filers. Early-season filers generally view their tax refunds as an important source of funds and file their tax returns shortly after receiving their W-2s in order to receive their refunds as quickly as possible. The remaining 59% of tax returns filed with the IRS in 2003 were filed by late-season filers.

In 2003, approximately 74% of our customers were early-season filers and approximately 26% were late-season filers. Our early-season filers tend to have a lower AGI than our late-season filers. In 2003, 95% of our early-season filers were eligible to receive a refund. Reflecting their focus on speed, approximately 80% of our early-season filers in 2003 purchased a financial product that accelerated their ability to access the funds associated with their tax refunds. Our late-season filers tend to have a higher AGI on average and attribute less value to the early receipt of their refunds, leading to a lower penetration rate for financial products; approximately 40% of our late-season filers purchased a refund-based financial product in 2003. Late-season filers also tend to have more complex tax return preparation needs, which typically generate higher tax return preparation fees.

Industry Opportunity

Our network prepared over 2.8 million tax returns in 2003, making our network the second largest tax return preparation service in the United States. Despite our strong industry position, we believe there are significant opportunities for us to grow. The tax returns our network prepared in 2003 represented only 2% of the total individual tax returns in the United States and less than 4% of the total tax returns filed by paid tax return preparers in 2003.

In 2003, approximately 90% of our customers had an AGI of less than $50,000. The 2.5 million tax returns prepared by the Jackson Hewitt network for this segment represented approximately 3% of the approximately 94 million tax returns filed by individuals with less than $50,000 AGI in the United States in 2003, representing a significant opportunity. We also define our opportunity in terms of the geographic reach of our existing network. We have divided the country into approximately 4,500 territories, each consisting of approximately 50,000 people. As of January 31, 2004, our network had offices operating in approximately 2,700 territories, leaving the remaining 40% of territories available to expand our network. In 2003, of the 77 million tax returns prepared with the help of a paid tax return preparer last year, only 23 million tax returns, or 30% of the paid tax preparer industry, were filed by individuals residing within territories in which we operate.

Our Growth Strategy

Our objective is to grow our revenues and net income by pursuing the following six strategic initiatives:

increase the number of offices in our network;

increase the number of tax returns filed by our existing offices;

increase our profitability by using our franchise model;

increase the profitability of company-owned offices;

continue to focus on offering innovative financial products; and

expand into new markets.

Increase the Number of Offices in Our Network

The core element of our growth strategy is to expand our network. Over the past six years, we have increased the number of offices in our network at an average annual rate of 16%, from approximately 2,000 offices in 1998 to 4,937 offices as of January 31, 2004.

Increase penetration of existing markets. Within territories our network currently serves, we believe we have the opportunity to increase the number of offices in our network significantly without saturation. In 2003, our existing territories were largely under-penetrated, with only 19% of our territories having reached our target of at least three offices per territory.

Expand our presence in the retailer channel. We also intend to expand our network through our relationships with national and large regional retailers and shopping malls, including Wal-Mart Stores, Inc., K-Mart Corp., Simon Property Group, General Growth Property, Inc., The Kroger Co., Rent-A-Center, Inc. and other chains, whose customer demographics significantly overlap with ours. Our agreements with these retailers allow Jackson Hewitt offices to be located within the retail stores in high-traffic areas during the tax season at relatively modest costs. As of January 31, 2004, our network had approximately 1,500 offices in retailer locations nationwide, including approximately 1,100 in Wal-Mart stores. We continually pursue similar opportunities with other retailers.

Franchise sales. We expect to increase the number of our franchised offices each year through the sale of new franchises. We divide the country into specific territories, which are geographic areas generally containing 50,000 people. We have identified a total of 4,500 territories in the United States of which approximately 40%, or 1,800 territories, remain available to expand our network. We focus primarily on selling new territories to high-quality franchisees already in our franchise system and secondarily to tax preparers or entrepreneurs new to our franchise system. Over the past three years, we sold an average of over 200 territories per year.

Conversions. Conversions of existing tax return preparers to Jackson Hewitt offices present the opportunity for established third-party tax return preparation businesses to join our franchise system in return for a conversion payment. Because the paid tax return preparer industry is large and highly-fragmented, we believe that there are opportunities to convert high-quality tax return preparation businesses to our franchise system. Conversions involve both independent tax return preparers joining our franchise system directly and our franchisees acquiring established high-quality independent tax return preparers in their territory. Through conversions, we are able to add a mature base of customers to our franchise system, thereby accelerating the growth in the number of tax returns prepared as compared to the growth generated during the ordinary maturation period of new offices. Conversions added 54 offices and approximately 49,000 tax returns in 2003 to the Jackson Hewitt network.

Acquisitions. Acquisitions present the opportunity for us to add established third-party tax return preparation businesses to our company-owned office network. Acquisitions in 2003 added 54 offices and approximately 43,000 tax returns to our operational results.

Increase the Number of Tax Returns Filed by Our Existing Offices

We intend to increase the number of tax returns filed in our network’s existing offices. In 2003, we increased same-store tax return volume by 6%, despite limited growth in the overall market for tax returns filed by paid tax return preparers. We attribute this growth to office maturation, operational improvements and improved marketing efforts, including sponsorships and increased marketing to late-season filers.

Our experience indicates that mature offices generally outperform newer offices. More mature offices increase the number of tax returns prepared by building brand awareness and customer recognition in a given location, improving tax preparer productivity, reinvesting in and expanding office operations and capturing new and repeat customers. However, our network has yet to achieve its full potential. For the 2004 tax season, our network opened 1,099 new offices and 57% of our network’s current offices have been a part of our network for fewer than five years. The following chart identifies

the average number of tax returns prepared by offices in our network in 2003 at maturity levels ranging from one year through ten years:


Number of Tax Seasons in our Network	Offices as a % of Total Jackson Hewitt Offices		Average Number of Tax Returns Prepared per Office
1 year	23	%	312
2 years	13	%	453
3 years	13	%	567
4 years	8	%	611
5 years	11	%	634
7 years	4	%	892
10 years	4	%	1,349

Customer Acquisition. We believe we can acquire both early- and late-season customers by focusing on hourly workers, large employers and specific occupational categories that fit our core demographic. While our core customers remain early-season filers, we intend to increase our efforts to reach more late-season filers. In 2003, our network prepared approximately 725,000 tax returns during the period from March 1st through April 15th, as compared to approximately 678,000 tax returns for late-season filers during the comparable period in the prior year. In addition to improving the overall volume of tax returns prepared per office, increased activity in the late season will also help to more fully utilize capacity.

We intend to increase our share of the tax preparation industry by focusing our advertising and marketing efforts on improving the recognition of the Jackson Hewitt brand name with targeted national, regional and local marketing. Our marketing efforts include national advertising and sponsorships, regional advertising and partnering with large, high-traffic retailers to drive customer awareness and increase customer traffic. National advertising focuses on both early-season and late-season filers through network television advertisements, direct-to-consumer marketing and sponsorships of sports organizations whose fan base closely mirrors our core customer demographic group, including the Professional Bowlers Association and the Roush Racing team, a participant on the NASCAR racing circuit. At the regional level, we customize marketing plans with franchisees to target our message to key markets, using local and regional television, radio and outdoor advertising.

Customer Retention. We also focus on retaining existing customers who have previously used our services and products. Our customer retention efforts include enhancing our product offering, improving customer service, maintaining office appearance and providing selected product offerings to returning customers, such as HELP.

Improve operational efficiencies. We intend to continue to make operational and functional improvements to increase productivity, capacity and the volume of tax returns prepared. Our managers assist our franchisees in office site selection to maximize traffic flow and improve operations and managerial decision-making. Functional improvements include upgraded system performance to increase productivity, management tools to increase the volume of tax returns prepared and operational efficiencies and improved tax return preparer training to increase retention of seasonal tax preparers and enhance quality of service.

Increase Our Profitability by Using Our Franchise Model

Our franchise model enables us to grow more quickly with less capital investment and lower operating expenses than if we directly operated all of the offices in our network. The franchise model has an inherently higher profit margin than that of our company-owned offices, as our existing infrastructure permits additional franchise growth without significant additional fixed cost investment.

We therefore intend to increase profitability by growing the revenue we generate through the franchise system by adopting management initiatives that promote growth and improving our technology infrastructure, product offering and marketing efforts. These improvements have generated significant increases in franchisees’ revenues. In 1999, only 15 of our franchisees generated more than $1 million in revenues. In 2003, 86 franchisees generated more than $1 million in revenues.

Increase the Profitability of Company-Owned Offices

We intend to improve the profitability of our company-owned offices by focusing on growth and by taking advantage of our previous investments in infrastructure. Our company-owned operations strategy began with the consolidation of some of our largest franchisees and expanded as we grew our share through the acquisition and integration of independent tax preparation businesses. In 2002, we acquired TSA to better focus on growth and to improve cost management. While we will continue to pursue acquisition opportunities for our company-owned office network, we are focused primarily on organic growth through the opening of new company-owned offices within existing territories as well as increasing office productivity. For example, in 2002 and 2003 we added an average of 45,000 tax returns through acquisitions. In contrast, in 2004, we acquired approximately 15,000 tax returns, but also opened 119 new offices, an increase of 23% in the number of offices.

Continue to Focus on Offering Innovative Financial Products

We continue to develop and offer additional products designed to attract and retain customers and generate incremental revenue. The primary financial products we offer are refund anticipation loans, accelerated check refunds and assisted direct deposits, which help our customers obtain access to funds more quickly than if they filed tax returns on their own. We also develop and introduce innovative products—including the Jackson Hewitt CashCard, a MasterCard-branded debit card, and the Holiday Express Loan Program, or HELP which are unique to the industry. Our CashCard provides our customers, many of whom do not have bank accounts, with the convenience and safety of a debit card that they can use at thousands of locations nationwide. HELP provides selected customers with the opportunity to receive loans during the November and December holiday shopping season, well in advance of their tax refund. In addition, we have introduced other products including Gold Guarantee and Money Now. In 2003, our customers purchased nearly 2.4 million financial products in conjunction with having their tax returns prepared by us representing approximately 26% more products than were purchased in 2002.

Expand into New Markets

One of our long-term strategies is to expand into markets with income tax systems similar to the United States’, such as Canada and Puerto Rico. We also plan to develop products and services to capture customers in the growing online segment. These initiatives are at an early stage and we continue to review them in light of changing business conditions. We may change our plans, and future developments could differ from those we intend or expect to occur.

Business Description

We generate revenues primarily from three sources: royalty and advertising fees paid by our franchisees, service revenue, including tax return preparation and related service fees provided at company-owned offices, and fees and other revenue received from financial institutions in connection with our facilitation of the sale of financial products. Our total revenues were $171.5 million in 2003. Royalty and advertising fees paid by our franchisees were $63.9 million in 2003, or 37% of our net revenues. Service revenue, including tax return preparation and related services revenues provided at our company-owned offices was $48.4 million in 2003, or 28% of our net revenues. Fees and other

revenue received from financial institutions in connection with financial products were $48.1 million in 2003, or 28% of our net revenues.

Tax Return Preparation Services

We provide our customers with fast and accurate tax return preparation services and electronic filing. We provide one of the most comprehensive computerized tax return preparation services in the industry and are capable of filing any individual tax return. Our tax return preparation process is designed to ensure accuracy at each step. We use our proprietary software, ProFiler, which features built-in error detection, to prepare customers’ tax returns. We also check tax returns through systems at our corporate headquarters before electronically filing our customers’ tax returns with the IRS and the appropriate state departments of revenue.

We generate revenue from fees for preparing tax returns and electronically filing tax returns either directly, for those tax returns prepared in company-owned offices, or indirectly, in the form of royalty payments for tax returns prepared at our franchised offices.

Financial Products

We facilitate the sale of the financial products listed below that enable our customers to have access to funds more quickly than if they filed their tax returns on their own and waited to receive a refund directly from the IRS. We enable our customers to have their tax returns prepared by trained tax return preparers with no cash outlay at the time of filing. To obtain these products, our customers pay an application fee to our franchisees and company-owned offices, a fee to the financial institution providing the financial product and, in the case of a refund anticipation loan, a finance charge.

We facilitate the sale of the following refund-based financial products:

Refund Anticipation Loan. Through this program, our customers may apply for loans in an amount up to $7,000, secured by their federal income tax refund. The borrowed funds are generally disbursed to customers within one to three days from the time their tax returns are filed with the IRS. In 2003, approximately 34% of our customers purchased a refund anticipation loan.

Money Now. Money Now allows qualifying customers to receive an advance of up to $730 on their refund anticipation loan on the same day as their tax returns are filed in anticipation of the receipt of their refund anticipation loan or tax refund.

Accelerated Check Refund. This product is not a loan and is designed for our customers who wish to receive their federal and state income tax refunds quickly but do not elect to receive the funds immediately. Our customers choose to have their tax refunds deposited by the IRS directly into bank accounts established for this purpose by a financial institution, generally allowing us to dispense bank checks directly to the customers within two to three weeks of filing their tax returns. In 2003, approximately 29% of our customers purchased an accelerated check refund.

Assisted Direct Deposit. This product is not a loan and is designed for customers who have their own bank accounts, but do not wish to make an up-front cash payment for tax return preparation. We facilitate the direct deposit of their tax refunds, net of any fees, into their checking or savings accounts.

We also facilitate the sale of the following financial products:

HELP. Through this product, qualifying customers receive an unsecured $575 loan during the November and December holiday shopping season provided by financial institutions.

Jackson Hewitt CashCard. We market this MasterCard-branded debit card, which our customers may accept as an alternative to a check when they choose the refund anticipation loan or accelerated check refund products. Customers may use the card to obtain cash at an automated teller machine or to make retail purchases at any location that accepts MasterCard. Customers pay an upfront fee, and transaction and other fees to the financial institution providing this product.

Gold Guarantee. Gold Guarantee is an extended warranty that extends our basic guarantee which covers only penalties and interest. Under the Gold Guarantee, if our tax return preparer makes an error, we pay for any additional taxes owed up to $6,000. The guarantee extends for a three-year period subsequent to filing.

Franchise Operations

Franchise Development

Our historical growth has been largely attributable to the expansion of our franchise system. In 2003, we sold 251 new franchise territories and increased the net number of our franchised offices by 391.

We grow our franchise operations through the development of our existing franchisee relationships and through the selective recruitment of new franchisees. In addition, we are actively engaged in an effort to add new franchisees through our conversion program.

We believe that our franchise arrangements provide incentives to franchisees to increase the number of offices in their territory, because we charge an initial franchise fee of only $25,000 for a territory and do not charge this fee again when a franchisee adds new offices within its territory. In addition, our franchise agreement establishes performance standards for franchisees, including the requirement that they prepare at least 500 tax returns per territory in their second year as a franchisee, at least 600 tax returns in their third year and at least 1,000 tax returns in their fifth year and thereafter. These performance standards give our franchisees an incentive to invest in their growth and increase their market penetration.

Conversions of established third-party tax return preparation businesses to Jackson Hewitt offices present the opportunity for an established tax return preparer to join our franchise system in return for a conversion payment. Because the paid tax return preparer industry is large and highly-fragmented, we believe that there are opportunities to convert high-quality, independent tax return preparation businesses to our franchise system. Conversions involve both independent tax return preparers joining our franchise system directly and our franchisees acquiring established high-quality, independent tax return preparers in their territory. Through conversions, we are able to add a mature base of customers to our franchise system, thereby accelerating the growth in the number of tax returns prepared as compared to the growth generated during the ordinary maturation period of new offices.

We provide the converted franchisee with investment capital to cover the costs of conversion and to grow their current tax return base. For franchisees who enter our network through our conversion program, we typically waive the application and initial franchise fee. The investment capital is provided to them through our acceptance of a note from the new franchisee that will be forgiven if the converted franchisee meets certain performance-based criteria. Although conversions are typically completed without a one-time franchise fee, the accelerated time to maturity more than offsets the foregone $25,000 initial franchise fee and the investment capital we provide them. In 2003, we provided $3.4 million of investment capital for conversions.

The strength of our existing franchise system enables us to selectively recruit new franchisees. In 2003, approximately 60% of our sales of territories were sold to our existing franchisees and the

remaining territories were sold to new franchisees. For our recruitment of new franchisees, we advertise in select publications that target entrepreneurs who are interested in new franchise opportunities. We also respond to inquiries from potential franchisees who contact us through our website or are referred to us by our existing franchisees. In 2004, Entrepreneur magazine named us as one of the top five franchise opportunities.

Franchise Fees

Upon executing the franchise agreement, the franchisee is required to pay an application fee of $500 and an initial franchise fee of $25,000. We will, at our discretion, finance a portion of the initial franchise fee. We currently offer financing for our franchisees at rates ranging from an 8% annual percentage rate to a 12% annual percentage rate on the amount borrowed by the franchisee, depending on the creditworthiness of the franchisee.

In addition to the initial franchise fee and other start-up expenses, our franchise agreements require new franchisees to pay us royalties equal to 15% of their revenue (12% for most franchises who joined our network before 2000 and who signed a new franchise agreement under our early renewal program) and advertising fees equal to 6% of their revenue. We also charge franchisees a $2 fee for each tax return that they file electronically with the IRS.

Pursuant to our franchise agreements, we may spend in any fiscal year an amount greater or less than the aggregate contributions of advertising fees for that fiscal year. We may carry over unused advertising and marketing fees from year to year, and we are under no obligation to refund any unspent advertising and marketing fees to our franchisees if their franchise agreements terminate or expire.

The Franchise Agreement

Under the terms of our franchise agreement, each franchisee receives the right to operate Jackson Hewitt Tax Service offices within their designated geographic territory. Franchisees are permitted to operate as many offices within a specified territory as they choose. The term of the franchise agreement is 10 years. In 1999 and 2000, we offered our franchisees the opportunity to renew their franchise relationship with us before their franchise agreement expired. In this early renewal program, 93% of our franchisees entered into our new franchise agreement for a new 10-year term, and, less than 1% of our franchise agreements come up for renewal before 2008.

We require our franchisees to maintain quality standards in their choice of office location, office appearance, equipment and computer hardware, customer service and minimum opening hours. Each franchisee must obtain and continuously maintain the proper permits and certificates required by law, including an Electronic Filing Identification Number required in order to file federal tax refunds electronically. We distribute a business manual to our franchisees describing standards of business conduct and customer service. We monitor the quality of service, office appearance, accuracy of tax returns and training of personnel for all Jackson Hewitt offices, through our staff of ten regional directors and by sampling tax returns.

Franchisee Support

We provide our franchisees with services designed to increase their revenues, including training, administrative support, access to our proprietary ProFiler tax return preparation software and tax refund-related financial products, product development, quality assurance, toll-free tax preparer support service and a dedicated field staff to advise and monitor their business. We also provide our franchisees assistance with their marketing programs, the advantage of being linked to a toll-free office

locator service and information based on our market research. We believe that our franchise system gives our franchisees a competitive advantage over other local and regional tax services in their market.

We believe our proprietary ProFiler software and support enable our franchisees to retain existing customers once marketing efforts have helped to bring them into their offices. The technological backbone of our operating system is our proprietary ProFiler software, which offers both an interview-based and a forms-based tax return preparation system. The forms-based aspect of ProFiler allows for easier integration of acquired and converted tax return preparation businesses and allows our network to attract experienced tax return preparers as employees. ProFiler also enables franchised office managers to view reports that allow them to better manage the office. Developing, monitoring and updating our software are all services we provide to our franchisees.

We offer extensive training courses including initial franchisee training and ProFiler training for new franchisees as well as more advanced training for general managers of our large operators. Throughout the year, we offer numerous workshops that address such topics as how to train tax return preparers, tax updates, recruiting and staffing, new product updates and local advertising. We prepare and update our course materials as necessary. Our training department develops computer-based training courses on a number of tax-related topics and distributes them to our franchisees. Additionally, we provide each franchisee with field support to aid in site selection, market analysis and business strategies. We also provide access to a franchise service manager at our corporate headquarters who is available to provide information on research, updates and upcoming events. By joining our network, a franchisee is also given the opportunity to benefit from our buying power through our vendor relationships.

Selected franchisees are members of our Preferred Customer Group, which includes franchisees who are generally our largest and fastest growing and operate many franchised offices in multiple territories. In addition to providing these franchisees with preferential support services, we recognize them publicly for their continued growth and support of the system and look to them for input with respect to the services and products we provide or should provide in the future.

To promote compliance with franchise agreement, we audit franchisees on a random basis to ensure compliance with our operating manuals.

Office Site Selection

Offices in our network are typically 600 to 1,000 square feet and are able to accommodate anywhere from three to ten work stations. As with any retail operation, the location of a tax return preparation office is vital to its success. For this reason, we maintain the right to approve the site selection of all franchised offices and utilize specific criteria to evaluate potential office locations. In particular, we expect our network’s offices to:

be highly visible from a major intersection or busy street or be located within a highly-trafficked retail store;

have high levels of automobile or foot traffic; and

be close to shopping malls or other major food or clothing retailers, preferably discounters.

Our network expansion and profitability have benefited from our relationships with national and large regional retailers and shopping malls, including Wal-Mart Stores, Inc., K-Mart Corp., Simon Property Group, General Growth Property, Inc., The Kroger Co., Rent-A-Center, Inc. and other chains, whose customer demographics significantly overlap with ours. Our agreements with these retailers allow Jackson Hewitt offices to be located within the retail stores and shopping malls in high-traffic

areas during the tax season at relatively modest costs. As of January 31, 2004, our network had approximately 1,500 offices in retailer locations nationwide, including approximately 1,100 in Wal-Mart stores.

Marketing and Advertising

In 2003, we incurred $25.1 million in marketing and advertising expense, including national, regional and local campaigns to increase brand awareness and attract both early-season and late-season filers. Our budget is funded by both franchisee and company contributions. Our marketing efforts include national advertising and sponsorships, regional advertising and partnering with large, high-traffic retailers to drive customer awareness and increase customer traffic. National advertising focuses on early-season and late-season filers through network television advertisements, direct-to-consumer marketing and sponsorships of sports organizations whose fan base closely mirrors our core customer demographic group, including the Professional Bowlers Association and the Roush Racing team, a participant on the NASCAR racing circuit. At the regional level, we customize marketing plans with franchisees to target our message to key markets, using local and regional television, radio and outdoor advertising.

Intellectual Property

We regard our intellectual property as critical to our success, and we rely on patent, trademark, copyright and trade secret laws in the United States to protect our proprietary rights. We pursue the protection of our trademarks by applying to register the trademarks in the United States. In addition, we seek to protect our proprietary rights through the use of confidentiality agreements with employees, consultants, advisors and others.

We have obtained federal trademark registration of a number of marks, including Jackson Hewitt Tax Service, Gold Guarantee, Get More in Return, Jackson Hewitt CashCard, ProFiler and SuperFast Refunds. We have also applied for federal trademark registration of a number of marks, including HELP and Holiday Express Loan Program. We also assert a common law right to Money Now.

Personnel

As of January 31, 2004, we employed 336 full-time employees, consisting of 83 at our corporate headquarters located in Parsippany, New Jersey, 133 at our technology facility located in Sarasota, Florida, 101 at our company-owned offices and 19 other full-time employees. In addition, our company-owned offices employed approximately 6,000 seasonal employees during the 2004 tax season.

Competition

Our business focuses on two customer bases, the consumer of tax return preparation services and the individual or other entity ready to operate a Jackson Hewitt franchise. We believe the basis for competition for consumers of our tax return preparation services includes product mix, price, service and a reputation for quality. Our network competes with H&R Block, which is larger and more widely recognized than us, and with smaller independent tax return preparation services, small national and regional franchisors, regional tax return preparation businesses, regional and national accounting firms and financial service institutions that prepare tax returns as part of their businesses. We also face competition from the Free File Alliance, a consortium of the IRS and online preparation services that provides free online tax preparation and filing for selected filers and volunteer organizations that prepare tax returns at no cost for low-income taxpayers. Our ability to compete in the tax return preparation business depends on the geographical area, specific site location, local economic conditions, quality of on-site office management, the ability to file tax returns electronically with the IRS

and our ability to facilitate our customers’ obtaining financial products. We believe that customers choose our network’s offices because:

of our convenient locations;

they wish to obtain funds associated with their tax refunds quickly;

they prefer not to prepare their own tax returns; and

they are unwilling to pay the higher fees charged by most accountants or tax attorneys.

As the second largest franchisor of branded tax return preparation services, we seek to grow our system of franchised offices. Our competition for tax preparation franchises is relatively limited, with only one relatively small franchisor competing with us directly to attract franchisees on a national level. We believe that H&R Block, the largest tax franchisor, does not currently compete with us for new franchisees or franchised office locations because it currently is not selling new territories. We also face competition from regional franchisors of tax return preparation services. To some extent, we also compete with franchisors of other high-margin services that attract entrepreneurial franchisees. We believe franchisees are attracted to us because we:

are a well-known, national franchise;

facilitate the sale of financial products sought by customers;

offer low-cost financing and start-up costs are relatively low;

have a reputation for quality;

provide advertising support; and

have been recognized as an outstanding franchise opportunity by Entrepreneur magazine.

Facilities

All of the offices in our company-owned network are leased. In connection with this offering, we will enter into a sublease agreement with Cendant for our corporate headquarter space in Parsippany, New Jersey, and we expect that Cendant will assign to us the lease for our 27,000 square foot technology facility in Sarasota, Florida prior to completion of this offering. See “Certain Relationships and Related Transactions—Transitional Services Agreement.”

Regulation

We and our franchisees must comply with laws and regulations relating to our business. Regulations specific to our business are described below.

Tax Return Preparation

Federal legislation requires tax preparers to, among other things, set forth their signatures and identification numbers on all tax returns prepared by them, and retain for three years all tax returns prepared. Federal laws also subject tax preparers to accuracy-related penalties in connection with the preparation of tax returns. Preparers may be enjoined from further acting as tax preparers if they continually or repeatedly engage in specified misconduct.

With certain exceptions, the IRS prohibits the use or disclosure by income tax preparers of income tax return information without the prior written consent of the taxpayer. In addition, the Gramm-Leach-Bliley Act and related Federal Trade Commission regulations require income tax return preparers to adopt and disclose consumer privacy policies, and provide consumers a reasonable

opportunity to opt out of having personal information disclosed to unaffiliated third parties for advertising purposes. Some states have adopted or proposed more strict opt-in requirements in connection with use or disclosure of consumer information.

The IRS requires any tax return preparer with respect to any tax return or claim for refund who fails to comply with due diligence requirements imposed by regulations with respect to determining eligibility for or the amount of the earned income tax credit to pay a penalty of $100 for each failure. We have put systems and processes in place to comply with this due diligence obligation.

Many of our income tax courses are regulated and licensed in select states. Failure to obtain a tax school license could affect our revenues and limit our ability to develop interest in tax return preparation as a career or obtain qualified tax return preparers.

Financial Product Regulation

Federal statutes and regulations also regulate an electronic filer’s involvement in refund anticipation loans. Electronic filers must clearly explain that the refund anticipation loan is a loan and not a substitute for, or a quicker way of receiving, an income tax refund. Federal laws place restrictions on the fees an electronic filer may charge in connection with refund anticipation loans. Massachusetts and Mississippi have interpreted existing laws in a manner that would effectively limit the annual percentage rate on refund anticipation loans or restrict our ability to receive fees in connection with these loans. In addition, some municipal governments require certain disclosures with respect to refund anticipation loans. There are also many states that have statutes regulating, through licensing and other requirements, the activities of brokering loans, providing credit services and offering credit repair services to consumers for a fee.

Many states have statutes requiring the licensing of persons offering contracts of insurance. We have received inquiries from certain state insurance regulators about our Gold Guarantee program and the applicability of the state insurance statutes. In those states where the inquiries are closed, the regulators affirmed our position that the Gold Guarantee is not a contract of insurance and is therefore not subject to state insurance licensing laws.

Franchise Regulations

Our franchising activities are subject both to federal and state laws and regulations. Federal Trade Commission Trade Regulation Rule, 16 C.F.R. § 436 requires a franchisor to give any prospective franchisee specified information about the nature of the franchise investment on the earlier of:

the first personal meeting;

10 business days before any binding agreement is signed; or

10 business days before any consideration is paid.

In addition to these disclosures, the franchisor must provide the prospective franchisee with a franchise agreement that reflects the specific terms on which the franchisee will be licensed to do business at least five business days before signing any binding agreement. There is no private right of action available to franchisees and prospective franchisees under this rule. Franchisees who claim violations must bring their complaints to the Federal Trade Commission. Violators are subject to civil penalties.

Federal regulation requires a franchisor to provide information in specific areas in a specific format. This information is contained in an offering circular. This regulation also permits a franchisor to prepare an offering circular in accordance with the format designed by the North American Securities

Administrators Association, called the Uniform Franchise Offering Circular or UFOC. We have selected the UFOC format for our franchise offering circular because it is accepted in all states with franchise laws, eliminating the need to prepare multiple forms of offering circulars.

Federal regulation governs franchisor conduct in all states; however, California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin have enacted state franchise laws. The federal regulation permits state laws to govern franchising if they provide protection that is equal to or greater than that provided by federal regulation. Most of these state laws require franchisors to provide specific information to franchisees, generally in the UFOC format. As a general rule, these formats are similar to the UFOC and impose no significant additional requirements on franchisors.

Most state laws provide a franchisee with a private right of action to seek direct recourse against a franchisor, in addition to administrative penalties, if a franchisor fails to comply with a state’s franchising laws. Moreover, some states, like California, have laws that govern the relationship between franchisor and franchisee after the franchise agreement is signed, such as laws that:

mandate notice and cure periods before termination;

restrict the grounds for termination without the opportunity to cure a default; or

restrict the franchisor’s ability to enforce a post-term competition covenant.

Both the federal trade regulation and the UFOC format require a franchisor to update its offering circular to include new financial statements. Federal regulation and the UFOC format also require a franchisor to update its offering circular in the event of material changes, such as significant changes in financial condition, changes to major fee structures, or changes in business opportunities being offered. We intend to update our offering circular following the completion of this offering to reflect our status as an independent, publicly-owned corporation.

Legal Proceedings

On August 27, 2002, a plaintiff group comprising 154 franchisees filed an action against us and Santa Barbara Bank & Trust in Superior Court of New Jersey, Morris County. The suit alleged, among other things, that we breached an agreement with them by not paying them a portion of surpluses in refund anticipation loan loss reserves. They sought a declaratory judgment, an accounting, payment of an incentive rebate, unspecified compensatory and punitive damages, treble damages and attorneys’ fees. By an order dated December 6, 2002, the court dismissed the conversion and fraud counts of the complaint with prejudice. Plaintiffs filed an amended complaint on March 17, 2003. The parties submitted the matter to mediation in July 2003, which resulted in a settlement in which we agreed, among other things, to make a $2 million cash payment, spend an additional $2 million on regional advertising from 2004 through 2006, pay additional rebates to franchisees of up to $3.00 per refund anticipation loan the sales of which they facilitate from 2004 through 2006, subject to certain performance criteria, and implement a new office royalty reduction program. The total charges for the settlement have been recorded in 2004.

On December 19, 2003, the court issued a ruling enforcing the settlement and dismissed the action with prejudice. As of the date of this prospectus, 149 plaintiffs in the action have executed the settlement agreement, and one has appealed the enforcement order of December 19, 2003.

On April 4, 2003, Canieva Hood and Congress of California Seniors brought a purported class action suit against Santa Barbara Bank & Trust and us in the Superior Court of California (Santa Barbara) in connection with the provision of refund anticipation loans, seeking declaratory relief as to the lawfulness of the practice of cross-lender debt collection, the validity of Santa Barbara’s cross-lender debt collection provision and whether the method of inducing customers to enter into the

provision is unlawful or fraudulent. We were joined in the action for allegedly aiding and abetting Santa Barbara’s actions. Ms. Hood has also filed a separate suit against us and Cendant on December 18, 2003 in the Ohio Court of Common Pleas (Montgomery County) and is seeking to certify a class in the action. The allegations relate to the same set of facts as the California action. In January 2004, we filed a motion to remove this case to federal court in Ohio and also moved the federal court to stay, or dismiss, the Ohio action while permitting the California action to proceed. While this matter is at a preliminary stage, we believe that we have meritorious defenses to the claims and intend to defend them vigorously.

In September 2003, the New York City Department of Consumer Affairs (“DCA”) issued a Notice of Violation to us and our New York City franchisees. The notice alleged violations as a result of misleading advertisements of tax refund/loan programs and the purported failure by franchisees to distinguish to consumers between loan products and non-financial product electronic filing options. The DCA contended that deficiencies in our training materials and marketing of loan products contributed to consumers’ confusion. On February 6, 2004, we reached a settlement with the DCA, pursuant to which we agreed, among other things, to pay $125,000 in fines and contribute $100,000 to New York City’s EITC Campaign.

In addition, we are from time to time subject to other legal proceedings and claims in the ordinary course of business, none of which we believe are likely to have a material adverse effect on our financial position, results of operations or cash flows. There can be no assurance that such litigation, or any future litigation, will not have a material adverse effect on our business, financial condition or results of operations.

MANAGEMENT

Directors and Executive Officers

In connection with this offering, we intend to amend and restate our certificate of incorporation and by-laws. The following summary of our management and directors contains reference to provisions of the amended and restated certificate of incorporation and by-laws, including the classification of the board of directors, the election and term of service of directors that will be in effect upon the completion of this offering. The following summary also contains reference to provisions of the amended and restated certificate of incorporation and by-laws, including the composition of the board of directors and its committees and compensation committee interlocks, that will be in effect upon the completion of this offering or within the time period prescribed by the stock exchange listing rules.

The following table sets forth information concerning our directors and executive officers. All our directors hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until their successors are duly elected and qualified. Samuel L. Katz and Thomas D. Christopoul intend to resign as directors after the consummation of this offering and will be replaced by four independent directors. The composition of the committees of the board of directors described below will be determined at that time. Executive officers serve at the request of the board of directors.


Name	Age	Position
Michael D. Lister	50	Chairman, President and Chief Executive Officer
Mark L. Heimbouch	39	Chief Financial Officer and Director
Samuel L. Katz	38	Director
Thomas D. Christopoul	39	Director
Perb B. Fortner	60	Executive Vice President, Franchise Operations
Richard P. Enchura	54	Senior Vice President and President of Tax Services of America
William A. Scavone	36	Senior Vice President, Franchise Sales, Administration and Development
Susan J. LoFrumento	38	Vice President and General Counsel

Set forth below is information concerning our directors.

Michael D. Lister has served as our President and Chief Executive Officer since September 2003 and our Chairman of the board since March 2004. From September 2001 to August 2003, he served as our President and Chief Operating Officer. From June 2001 to August 2001, he served as our Chief Operating Officer. From October 1999 to May 2001, he served as our Executive Vice President of Operations. From May 1976 until September 1999, Mr. Lister served in various positions with H&R Block, Inc., progressing from a tax preparer to Senior Vice President and Regional Director.

Mark L. Heimbouch has served as our Chief Financial Officer since May 2003 and a director since March 2004. From January 2003 to April 2003, Mr. Heimbouch pursued private investment activities. From August 2000 to December 2002, Mr. Heimbouch served as Chief Financial Officer of Teranex Inc. From May 1999 to August 2000, he served as Chief Financial Officer of Duro Communications, Inc. From January 1993 to May 1999, Mr. Heimbouch held various positions with First Data Corporation, including Vice President of Finance and Mergers and Acquisitions for Western Union International. From May 1986 to January 1993, Mr. Heimbouch served as a manager with Deloitte & Touche LLP.

Samuel L. Katz has served as a director since February 2004. Mr. Katz has been a Senior Executive Vice President of Cendant since July 1999, Chairman and Chief Executive Officer of Cendant’s Travel Distribution Services Division since April 2001 and Co-Chairman of Cendant’s

Financial Services Division since March 2003. In addition, he also served as the Chief Executive Officer of Cendant’s Financial Services Division from March 2003 until October 2003 and Chief Strategic Officer of Cendant from July 2001 until April 2003. From January 2001 to July 2001, Mr. Katz was Cendant’s Senior Executive Vice President—Strategic and Business Development and from January 2000 to January 2001, Mr. Katz was Chief Executive Officer of Cendant Internet Group. Mr. Katz was Cendant’s Senior Executive Vice President, Strategic Development from July 1999 to January 2000 and Executive Vice President, Strategic Development from April 1998 until July 1999.

Thomas D. Christopoul has served as a director since February 2004. Mr. Christopoul has been a Senior Executive Vice President of Cendant since April 2000 and Cendant’s Co-Chairman and Chief Executive Officer, Financial Services Division since October 2003. From April 2000 to October 2003, he served as Cendant’s Chief Administrative Officer. From January 2000 to April 2000, Mr. Christopoul was President, Cendant Membership Services. From October 1999 to January 2000, Mr. Christopoul was Cendant’s Executive Vice President, Corporate Services. From April 1998 to October 1999, he was Cendant’s Executive Vice President, Human Resources.

Set forth below is information concerning our executive officers, in addition to Messrs. Lister and Heimbouch.

Perb B. Fortner has served as our Executive Vice President, Franchise Operations since January 2003. From October 2000 to December 2002, he served as our Senior Vice President of Operations. From 1969 to September 2000, Mr. Fortner served in various positions with H&R Block, Inc. (Kansas City, Missouri) progressing from Assistant District Manager to Director, Franchise Operations, Assistant Vice President and Regional Director.

Richard P. Enchura has served as our Senior Vice President and President of TSA, responsible for operating TSA since October 2000. From 1971 to October 2000, Mr. Enchura worked for H&R Block in a variety of roles from District Manager to Regional Director to Director of H&R Block’s eastern division. Mr. Enchura has over 32 years of experience building and running operations in the paid tax return preparer industry.

William A. Scavone has served as our Senior Vice President of Franchise Sales, Administration and Development since October 2000. From February 1998 until October 2000, he served as Vice President of Sales and Advertising with Transactional Data Solutions (a MasterCard Company), a provider of database advertising and market research services located in Purchase, New York. From May 1995 until February 1998, Mr. Scavone served as President and General Manager of Strategic Marketing LLC.

Susan J. LoFrumento has served as our General Counsel since March 2002. From May 2000 to May 2001, she served as a Vice President and General Counsel of Working Woman Network, Inc. in New York, NY. From October 1991 to April 2000, Ms. LoFrumento was an associate at Morgan, Lewis & Bockius, LLP in New York, NY.

Composition of the Board of Directors

Our certificate of incorporation provides that our board of directors shall consist of such number of directors as from time to time fixed exclusively by resolution of the board, which currently consists of four persons. Prior to the completion of this offering, the certificate of incorporation will be amended to divide our board into three classes, with each class being elected each year. Each director will serve a three-year term, with termination staggered according to class, except that Class I directors will have an initial term expiring in 2005, Class II directors will have an initial term expiring in 2006, and Class III directors will have an initial term expiring in 2007. Mr. Heimbouch will be a member of Class II and Mr. Lister will be a member of Class III.

Presiding Director

Prior to the completion of this offering, our board of directors will create a position of presiding director. The presiding director will be an independent director designated by the non-management members of the board annually. The presiding director’s primary responsibilities will include presiding over periodic executive sessions of the non-management members of the board of directors, advising the Chairman of the board and committee chairs with respect to meeting agenda and information needs, providing advice with respect to the selection of committee chairs and performing other duties that the board may from time to time delegate to assist it in the fulfillment of its responsibilities.

Committees of the Board of Directors

Pursuant to our certificate of incorporation, the board of directors’ authority to designate committees is subject to the provisions of the by-laws. Pursuant to the by-laws, the board of directors may designate one or more directors as alternate members of any committee to fill any vacancy on the committee and to fill a vacant chairmanship of a committee occurring as a result of a member or chairman leaving the committee, whether through death, resignation, removal or otherwise. Under the by-laws, the board of directors will establish the following committees:

Executive Committee

The executive committee will be comprised of not fewer than three directors elected by a majority of the board. The executive committee may exercise all of the powers of the board of directors when the board is not in session, including the power to authorize the issuance of stock, except that the executive committee has no power to (a) alter, amend or repeal the by-laws or any resolution or resolutions of the board of directors, (b) declare any dividend or make any other distribution to our stockholders, (c) appoint any member of the executive committee or (d) take any other action which legally may be taken only by the full board of directors. The Chairman of the board will serve as chairman of the executive committee.

Compensation Committee

The compensation committee will be comprised of not fewer than three directors elected by a majority of the board. The compensation committee will oversee the administration of our benefit plans, review and administer all compensation arrangements for executive officers and establish and review general policies relating to the compensation and benefits of our officers and employees. All members of the compensation committee will be required to be independent under the rules of the stock exchange and our director independence criteria.

Audit Committee

The audit committee will be comprised of not fewer than three directors elected by a majority of the board. The audit committee will oversee our accounting and financial reporting processes, as well as the audits of our financial statements. All members of the audit committee will be required to be independent under the rules of the stock exchange and our director independence criteria. In addition, each member of the audit committee will be required to have the ability to read and understand fundamental financial statements. The audit committee will also be required to have at least one member that qualifies as an “Audit Committee financial expert” as defined by the rules of the SEC.

Corporate Governance Committee

The corporate governance committee will be comprised of not fewer than three directors elected by a majority of the board. All members of the corporate governance committee will be required to be

independent under the rules of the stock exchange and our director independence criteria. The corporate governance committee’s responsibilities will include identifying and recommending to the board appropriate director nominee candidates and providing oversight with respect to corporate governance matters.

Compensation Committee Interlocks and Insider Participation

None of our executive officers will serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Compensation of Directors and Executive Officers

Compensation of Directors

The following sets forth the compensation expected to be paid to our non-employee directors in 2004:


	Compensation $(1)(2)
Annual Retainer	50,000	(3)
New Director Equity Grant	50,000	(4)
Board and Committee Meeting Attendance Fee	0
Audit Committee Chair	15,000
Audit Committee Member	12,500
Compensation Committee Chair	10,000
Compensation Committee Member	8,000
Corporate Governance Committee Chair	9,000
Corporate Governance Committee Member	7,000
Presiding Director Stipend	15,000

(1)	Members of our board of directors who are also our officers or employees will not receive compensation for serving as a director (other than travel-related expenses for meetings held outside of our headquarters).

(2)

The presiding director stipend and all committee membership stipends are to be paid 50% in cash and 50% in the form of deferred stock units relating to our common stock. These units will be issued under our 2004 Equity and Incentive Plan (or a successor plan). Directors may elect to receive more than 50% of such stipends in the form of deferred stock units relating to our common stock, which will be issued under our 2004 Equity and Incentive Plan. The number of deferred stock units to be so granted will be determined by dividing the value of the compensation to be paid in the form of deferred stock units by the fair market value per share of our common stock as of the date of grant. Each deferred stock unit entitles the holder to receive one share of our common stock immediately following such non-employee director’s retirement or separation of service from the board for any reason. The non-employee directors may not sell or receive value from any deferred stock unit prior to such separation of service.

(3)

The annual retainer will be paid to our non-employee directors in installments on a quarterly basis. 50% percent of the retainer will be paid in cash, with the remaining 50% to be paid in the form of deferred stock units relating to our common stock. These units will be issued under our 2004 Equity and Incentive Plan (or a successor plan). A non-employee director may elect to receive his or her entire retainer in the form of deferred stock units.

(4)	The number of deferred stock units to be granted will equal $50,000 divided by the fair market value of our common stock on the date of grant. For the initial grant, the initial public offering price will be the fair market value.

Executive Officer Compensation

The following table sets forth information concerning total compensation paid to our Chief Executive Officer and our four other most highly compensated executive officers who served in such capacities as of December 31, 2003 for services rendered to us in 2003. While our fiscal year will end on April 30 in the future, our compensation has been until now determined based on Cendant’s fiscal year. Cendant’s most recently completed fiscal year ended December 31, 2003. We have also included an executive officer, Mr. Heimbouch, whom we expect will be one of our five most highly compensated executive officers in 2004. We refer to these executives as our “named executive officers” elsewhere in this prospectus. This table includes compensation received by the named executive officers from us as well as from Cendant. All material compensation received from Cendant is recorded by us as compensation expense.

Summary Compensation Table


	Annual Compensation						Long-Term Compensation
Name and Principal Position	Calendar Year	Salary(1)		Bonus(2)		Other Annual Compensation(3)	Restricted Stock Unit Awards(4)		All Other Compensation(5)
Michael D. Lister	2003	$	270,770	$	152,308	—	$	400,007	$	10,154
President & Chief Executive Officer
Richard P. Enchura	2003		201,947		121,520	—		225,005		14,531
Senior Vice President and President of Tax Services of America
William A. Scavone	2003		332,324		—	—		150,000		10,000
Senior Vice President, Franchise Sales, Administration and Development
Perb B. Fortner	2003		201,947		113,473	—		225,005		18,058
Executive Vice President, Franchise Operations
Jeanmarie Cooney	2003		195,825		91,376	—		124,997		15,874
Senior Vice President, Business & Strategic Development
Mark L. Heimbouch…	2003		112,404		87,705	—		49,995		2,950
Chief Financial Officer (6)

(1)	Effective upon the completion of this offering, Mr. Lister’s annual base salary will increase to $ , and Mr. Heimbouch’s annual base salary will increase to $ . Mr. Scavone’s salary amount includes $182,323 in sales commissions.

(2)

Bonus amounts include 2003 bonuses paid in February 2004, which were paid in connection with our attainment of pre-established performance goals. Bonus amounts also include individual performance incentives paid in respect of 2003 upon attainment of pre-established individual and operational performance goals. Mr. Heimbouch’s bonus amount includes a $10,000 signing bonus.

(3)	For each named executive officer, perquisites and personal benefits have a value less than the lesser of $50,000 or 10% of the officer’s salary and bonus.

(4)

On April 22, 2003, Cendant granted to each named executive officer (other than Mr. Heimbouch) a number of restricted stock units relating to Cendant common stock. One-quarter of the restricted stock units will vest on each of the first four anniversaries of the date of grant, subject to the named executive officer remaining continuously employed with Cendant through each such vesting date. Upon vesting, each restricted stock unit entitles the holder to receive one share of Cendant common stock. In connection with this offering, each of our named executive officers will cease to be employed with Cendant, and each Cendant unvested restricted stock unit will terminate in accordance with its terms. Each named executive officer received the following number of Cendant restricted stock units: Mr. Lister, 29,326; Mr. Enchura, 16,496; Mr. Scavone, 10,997; Mr. Fortner, 16,496; Ms. Cooney, 9,164. Mr. Heimbouch was granted 2,723 Cendant restricted stock units on July 16, 2003 in connection with the commencement of his employment with us. The value of the shares underlying the Cendant restricted stock units as of the date of grant are shown in the table above and reflect a per unit value of $13.64

(for Mr. Heimbouch, a per unit value of $18.36). The value of the shares of Cendant common stock underlying such awards as of December 31, 2003, reflecting a per share closing price of $22.27 on December 31, 2003, equaled: Mr. Lister, $653,090; Mr. Enchura, $367,366; Mr. Scavone, $244,903; Mr. Fortner, $367,366; Ms. Cooney, $204,082; Mr. Heimbouch, $60,641. Holders of restricted stock units are entitled to receive cash dividend equivalents at the same time and to the same extent that Cendant pays dividends to holders of its common stock. Dividend equivalents are subject to the same vesting schedule as the restricted stock units to which they relate, and are paid in cash upon the vesting and payment of the related restricted stock units.

(5)	Amounts consist of matching contributions to a non-qualified deferred compensation plan and/or 401(k) plan sponsored and maintained by Cendant. Such defined contribution match includes matching contributions relating to 2003 bonuses that were paid in the first quarter of 2004.

(6)	Mr. Heimbouch commenced employment with us on May 1, 2003.

Cendant Stock Options

No Cendant stock options were granted to our named executive officers during 2003. The following table sets forth information concerning the exercise of options to purchase shares of Cendant common stock during 2003 by each of our named executive officers and the year-end value of unexercised options to purchase shares of Cendant common stock.

Aggregated Option Exercises in 2003 and Option Values as of December 31, 2003


Name	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options at Year-End (#)		Value of Unexercised In-the-Money Options at Year-End ($)
Name	Shares Acquired on Exercise (#)	Value Realized ($)	Exercisable	Unexercisable	Exercisable	Unexercisable
Michael D. Lister	60,000	545,250	262,666	33,334	942,051	382,756
Richard P. Enchura	N/A	N/A	77,333	6,667	781,909	85,721
William A. Scavone	12,000	102,992	27,000	10,000	115,853	128,575
Perb B. Fortner	15,000	164,900	57,333	6,667	515,309	85,721
Jeanmarie Cooney	64,250	561,583	168,423	18,750	646,113	241,078
Mark L. Heimbouch	N/A	N/A	N/A	N/A	N/A	N/A

2004 Equity and Incentive Plan

We intend to adopt the Jackson Hewitt Tax Service Inc. 2004 Equity and Incentive Plan, which will provide for the grant of annual cash bonuses and long-term cash awards, as well as equity-based awards, including restricted stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards to our directors, officers and other employees, advisors and consultants who are selected by our compensation committee for participation in the plan. The plan will also provide for the deferral of officer and director compensation. Stockholder approval of the plan will be obtained prior to the completion of this offering. Unless earlier terminated by our board of directors, the plan will expire on the tenth anniversary of the date of its adoption. Termination of the plan is not intended to adversely affect any award that is then outstanding without the award holder’s consent. Our board of directors may amend the plan at any time. Plan amendments are not intended to adversely affect any award that is then outstanding without the award holder’s consent, and we must obtain stockholder approval of a plan amendment if stockholder approval is required to comply with any applicable law, regulation or stock exchange rule.

Following the closing of this offering, we will issue shares of our common stock and options to purchase shares of our common stock under the 2004 Equity and Incentive Plan. These shares of common stock and options to purchase shares common stock will be issued to our officers and certain employees in exchange for Cendant restricted stock units and options to purchase shares of Cendant common stock held by such persons. In the exchange transaction, the number of shares of our common stock, the exercise price of the options and the number of shares of our common stock issuable upon exercise of such options will depend on the relative trading prices of our common stock and Cendant’s common stock following the closing of this offering. For purposes of

this preliminary prospectus, share numbers and option amounts are based on the midpoint of the initial public offering price range set forth on the cover page of this prospectus and the Cendant stock price as of a recent date. The actual amounts will change based on our stock price and Cendant’s stock price following the closing. In addition to the exchange transaction, options to purchase shares of our common stock, with a per share exercise price equal to the public offering price for this offering, will be made as outright grants to officers and certain employees.

Administration

The plan will be administered under the oversight of our compensation committee, which will have the authority, among other things, to determine who will be granted awards and all of the terms and conditions of the awards. The compensation committee will also be authorized to determine to what extent an award may be settled, cancelled, forfeited or surrendered, to interpret the plan and any awards granted under the plan and to make all other determinations necessary or advisable for the administration of the plan. Where the vesting or payment of an award under the plan is subject to the attainment of performance goals, the compensation committee will be responsible for determining that the performance goals have been attained. Neither the compensation committee nor our board of directors will have the authority under the plan to reprice, or to cancel and re-grant, any stock option granted under the plan, or to take any action that would lower the exercise, base or purchase price of any award granted under the plan without first obtaining the approval of our stockholders.

Cash Incentive Programs

The plan will provide for the grant of annual and long-term cash awards to plan participants selected by our compensation committee. The maximum value of the total cash payment that any plan participant may receive under the plan’s annual cash incentive program for any year will be $1 million, and the maximum value of the total payment that any plan participant may receive with respect to each performance period under the plan’s long-term cash incentive program will be $1 million for each year covered by the performance period. Payment of awards granted under the cash incentive programs may be made subject to the attainment of performance goals to be determined by our compensation committee in its discretion. The compensation committee may base performance goals on one or more of the following criteria, determined in accordance with generally accepted accounting principles, where applicable:

pre-tax income or after-tax income;

earnings including operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, or extraordinary or special items;

net income excluding amortization or impairment of intangible assets, or goodwill;

earnings or book value per share (basic or diluted);

return on assets (gross or net), return on investment, return on capital, or return on equity;

return on revenues;

cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital;

economic value created;

operating margin or profit margin;

stock price or total stockholder return;

earnings from continuing operations;

cost targets, reductions and savings, productivity and efficiencies;

franchise sales targets; and

strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to divestitures, joint ventures and similar transactions.

The performance goals may be expressed in terms of attaining a specified level of the particular criterion, an increase or decrease in the particular criterion or a comparison of achievement against a peer group of companies, and may be applied to us or one of our subsidiaries or divisions or strategic business units. The compensation committee will have the authority to make equitable adjustments to the performance goals in recognition of unusual or non-recurring events, in response to changes in laws or regulations or to account for extraordinary or unusual events.

No payment may be made under either of the cash incentive programs under the plan prior to determination by the compensation committee that the applicable performance goals have been attained.

Equity Incentive Program

Our board of directors will determine the number of shares of our common stock that will be available for grants pursuant to the equity incentive program under the plan. Shares issued under the plan may be authorized but unissued shares or treasury shares. If any shares subject to an award granted under the plan are forfeited, cancelled, exchanged or surrendered, if an award terminates or expires without a distribution of shares or if shares of stock are surrendered or withheld as payment of either the exercise price of an award or surrendered or withheld as payment of either the exercise price of an award or withholding taxes in respect of an award, those shares of common stock will again be available for awards under the plan. Under the plan, there will be a limit on the number of shares of our common stock that may be made subject to stock options, stock appreciation rights or other awards to a single individual in a single plan year. In the event that the compensation committee determines that any corporate event, such as a stock split, reorganization, merger, consolidation, repurchase or share exchange, affects our common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of plan participants, then the compensation committee will make those adjustments as it deems necessary or appropriate to any or all of:

•

the number and kind of shares or other property that may thereafter be issued in connection with future awards;

•

the number and kind of shares or other property that may be issued under outstanding awards;

•

the exercise price or purchase price of any outstanding award; and/or

•

the performance goals applicable to outstanding awards.

The compensation committee will determine all of the terms and conditions of equity-based awards under the plan, including whether the vesting or payment of an award will be subject to the attainment of performance goals. The performance goals that may be applied to awards under the equity incentive program under the plan are the same as those discussed above under “–Cash Incentive Programs.”

The terms and conditions of stock options and stock appreciation rights granted under the plan will be determined by the compensation committee and set forth in an agreement. Stock options

granted under the plan may be “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, or non-qualified stock options. A stock appreciation right confers on the participant the right to receive an amount, in cash or shares of our common stock (in the discretion of the compensation committee), equal to the excess of the fair market value of a share of our common stock on the date of exercise over the grant price of the stock appreciation right, and may be granted alone or in tandem with another award. The exercise price of an option or stock appreciation right granted under the plan will not be less than the fair market value of our common stock on the date of grant. The grant price of a stock appreciation right granted in tandem with a stock option will be the same as the stock option to which the stock appreciation relates. The vesting of a stock option or stock appreciation right will be subject to such conditions as the compensation committee may determine, which may include the attainment of performance goals.

The terms and conditions of awards of restricted stock and restricted stock units granted under the plan will be determined by the compensation committee and set forth in an award agreement. A restricted stock unit confers on the participant the right to receive a share of our common stock or its equivalent value in cash, in the discretion of the compensation committee. These awards will be subject to restrictions on transferability which may lapse under those circumstances that the compensation committee determines, which may include the attainment of performance goals. The compensation committee may determine that the holder of restricted stock or restricted stock units may receive dividends (or dividend equivalents, in the case of restricted stock units) that may be deferred during the restricted period applicable to these awards.

The plan will also provide for other equity-based awards, the form and terms of which will be determined by the compensation committee consistent with the purposes of the plan. The vesting or payment of one of these awards may be made subject to the attainment of performance goals.

The plan will provide that, unless otherwise determined by the compensation committee, in the event of a change in control (as defined in the plan), all awards granted under the plan will become fully vested and/or exercisable, and any performance conditions will be deemed to be fully achieved.

Employee Stock Purchase Plan

We expect to adopt and sponsor an employee stock purchase plan which will enable our eligible employees to purchase shares of our common stock at a discount using amounts deducted from their eligible wages. Amounts will be deducted during each payroll cycle and accumulated during calendar month offering periods. At the end of each offering period, accumulated amounts will be used to purchase shares of our common stock at a discount of 5% from the closing price as of the last day of the offering period. The aggregate number of shares of our common stock that will be available for issuance under our employee stock purchase plan is 400,000. The plan will be administered under the oversight of our compensation committee, which has the discretion to alter how the plan will be administered, including with respect to the frequency of offering periods and the amount of the discount.

Employment Agreements

Each of our named executive officers has signed an offer letter with us that sets forth his or her position, salary and benefits, and pursuant to which each officer acknowledges his or her status as an “at-will” employee. Mr. Lister’s offer letter obligates us to pay him one year’s salary as severance pay in the event that his employment is terminated for reasons other than death, disability, retirement, voluntary resignation or termination for “cause” (as defined by us). Mr. Lister’s and Mr. Heimbouch’s offer letters will be superseded by the new employment agreements described below.

We expect to enter into employment agreements with two of our named executive officers, Messrs. Lister and Heimbouch, which will become effective subject to and upon completion of this offering. The employment agreements will set forth the base salary, bonus opportunities and initial equity awards to be provided to these officers, as well as each officer’s entitlement to employee benefits and officer perquisites.

Mr. Lister’s employment agreement will provide him with an annual base salary equal to $ and an annual target bonus opportunity, subject to attainment of performance goals, equal to % of his earned base salary in the applicable year. Mr. Heimbouch’s employment agreement will provide him with an annual base salary equal to $ and an annual target bonus opportunity, subject to attainment of performance goals, equal to % of his earned base salary in the applicable year.

Each employment agreement will provide that in the event we terminate the officer’s employment, other than for cause (as defined in the employment agreements) or in the event the officer resigns under a constructive discharge (as defined in the employment agreements), the officer will become entitled to a cash severance benefit of % of the sum of the officer’s then current base salary plus target annual bonus. Such severance payment will be subject to the officer executing a release of claims in our favor.

Each employment agreement will contain important restrictive covenants intended to protect our confidential information and limit each officer’s ability to compete against us or solicit our employees.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transitional Services Agreement

Upon completion of this offering, we will enter into a transitional services agreement with Cendant to provide for an orderly transition to being an independent company and to govern our continuing relationship with Cendant. We will also enter into a sub-lease agreement for our New Jersey corporate headquarters. Under the transitional services agreement, Cendant will agree to provide us with various services, including services relating to facilities, human resources and employee benefits, payroll, financial systems management, treasury and cash management, accounts payable services, tax support, event marketing, revenue audit services, telecommunications services, information technology services, call support services and public and regulatory affairs. The transitional services agreement will also contain agreements relating to indemnification, tax sharing and tax indemnification, access to information and non-solicitation of employees.

The following includes summaries of services that will be provided to us by Cendant under the transitional services agreements and the manner of allocation of costs to us for these services. Also set forth is a summary of intercompany transactions since the beginning of our last fiscal year and for the two fiscal years preceding our last fiscal year. We believe these allocations approximate the actual costs to Cendant to provide these services.

Indemnification. The transitional services agreement will provide that we will indemnify Cendant and its officers, directors, employees and agents against losses (including, but not limited to, those arising out of litigation matters and other claims) based on, arising out of or resulting from:

any breach by us of the transitional services agreement or any other agreement with Cendant, including the sub-lease agreement for our New Jersey headquarters;

any other activities we engage in;

any third party claims relating to other acts or omissions arising out of performance of the transitional services agreement and the sub-lease, whether in the past or future;

any guaranty, keepwell, net worth or financial condition maintenance agreement of or by Cendant provided to any parties with respect to any of our actual or contingent obligations; and

other matters described in the transitional services agreement.

In addition, we have agreed to indemnify Cendant and its officers, directors, employees and agents against civil liabilities, including liabilities under the Securities Act of 1933 relating to misstatements in or omissions from the registration statement of which this prospectus forms a part and any other registration statement that we file under the Securities Act, other than misstatements or

omissions relating to information specifically about Cendant in the registration statement and furnished in writing by Cendant for use in the preparation of any such registration statement, against which Cendant has agreed to indemnify us.

We do not currently expect to purchase insurance to specifically cover potential claims for indemnification by Cendant and its officers, directors, employees and agents.

The transitional services agreement will also provide that Cendant will indemnify us, our officers, directors, employees and agents against losses involving claims by third parties based on, arising out of or resulting from:

any breach by Cendant of the transitional services agreement or the ancillary agreements executed in connection with the transitional services agreement; and

the operation or conduct of the business of Cendant, other than the business of Jackson Hewitt, its subsidiaries or its predecessors.

Tax Sharing and Tax Indemnification. In connection with our separation from Cendant, we will enter into a tax sharing and indemnification agreement with Cendant that will govern the allocation between the companies of tax liabilities and related tax matters, such as the preparation and filing of tax returns and tax contests, for the taxable periods before and after the completion of this offering.

The tax sharing and indemnification agreement also will provide that:

we will be responsible for the respective tax liabilities imposed on or attributable to us and any of our subsidiaries relating to all taxable periods (except for income taxes relating to being a member of a Cendant federal, state or local affiliated or similar income tax group). Accordingly, we will indemnify Cendant and its subsidiaries against any such tax liabilities imposed on or attributable to us and any of our subsidiaries;

after the separation, we will be responsible for preparing and filing all tax returns required to be filed by us or any of our subsidiaries; and

we will be responsible for handling, settling, and contesting any tax liability for which we are liable under the terms of the tax sharing and indemnification agreement.

Access to Information. The following terms will govern access to information under the transitional services agreement:

on the date of our separation from Cendant, Cendant will have delivered to us copies of all corporate books and records related primarily to our business;

subject to applicable confidentiality provisions and other restrictions, we and Cendant will each give the other any information within that company’s possession that the requesting party reasonably needs:

to comply with requirements imposed on the requesting party by a governmental authority;

for use in any proceeding or to satisfy audit, accounting, tax or similar requirements; or

to comply with its obligations under the transitional services agreement or the ancillary agreements;

we will provide to Cendant, at no charge, all financial and other data and information that Cendant determines is necessary or advisable to prepare its financial statements and reports or filings with any governmental authority;

we and Cendant will each use reasonable best efforts to provide assistance to the other with respect to litigation and to make available to the other directors, officers, other employees and agents as witnesses, in legal, administrative or other proceedings, and will cooperate and consult to the extent reasonably necessary with respect to any litigation;

the company providing information, consultant or witness services under the transitional services agreement will be entitled to reimbursement from the other for reasonable expenses;

each of Cendant and us will retain all proprietary information in its possession relating to the other’s business for a period of time, and, if the information is to be destroyed, the destroying company will give the other company the opportunity to receive the information; and

we and Cendant will agree to hold in strict confidence all information concerning or belonging to the other obtained prior to the date of the distribution or furnished pursuant to the transitional services agreement or any ancillary agreement, subject to applicable law.

Franchise Agreement Guarantees. Regulations applicable to the offer and sale of franchises require the inclusion of audited financial statements in offering materials delivered to prospective franchisees. As a wholly owned subsidiary of Cendant, we did not have our own audited financial statements. Therefore, Cendant’s audited financial statements, and its guarantee of our obligations under the franchise agreements attributable to such offering materials, were included in the offering materials to satisfy the regulations. Accordingly, Cendant historically has guaranteed the performance of our obligations to our franchisees under our franchise agreements. Following this offering and our separation from Cendant, we will include our own audited financial statements in the franchise offering materials, and Cendant will no longer provide these guarantees in connection with franchise agreements entered into or replaced after completion of this offering.

Insurance. We will be required to purchase our own insurance policies following the completion of this offering. Our insurance in the future will be significantly more expensive than the current insurance costs allocated to us by Cendant. We have paid, and currently pay, Cendant for a variety of insurance products. Cendant has generally allocated the cost of insurance to us based on the number of our employees. Under the transitional services agreement, Cendant will provide us with consulting services in connection with administration and monitoring of our own insurance policies as a separate public company until June 30, 2005. We will have the right to terminate the provision of this service without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights under the transitional services agreement. These insurance policies include executive risk coverage, property and casualty, workers compensation, umbrella liability insurance, and losses from crime.

Our allocated share of the costs of insurance was $115,000 for the nine months ended January 31, 2004, $102,000 in 2003 and $39,000 in 2002. In addition, costs for our directors’ and officers’ insurance for the nine months ended January 31, 2004 and the years ended April 30, 2003 and 2002 were included in our share of Cendant’s general corporate overhead, which is discussed below. We expect our cost for insurance to increase by $ million to $ million, primarily due to directors and officers insurance and errors and omissions insurance.

Facilities. Cendant has allocated to us the cost of occupying 24,591 usable square feet within the 7 Sylvan Way complex for our corporate headquarters in Parsippany, New Jersey and 27,000 square feet for our technology facility in Sarasota, Florida. We pay Cendant rent under this arrangement and for related services such as access to the cafeteria, maintenance and security for the 7 Sylvan Way facility. We pay rent directly to the landlord of the Sarasota, Florida facility under

Cendant’s lease. We will need additional space within our 7 Sylvan Way complex for additional support services personnel that we will need following the completion of this offering. Cendant will continue to charge rent and allocate related costs to us for the 7 Sylvan Way facility under the sub-lease agreement for a period of fifteen months from completion of this offering at a cost of $ annually, subject to operating cost fluctuations in 2005. Cendant may terminate the sub-lease upon 120 days prior written notice; however, Cendant will be required to relocate us, at Cendant’s cost, to mutually acceptable office space. We expect that the lease for the Sarasota, Florida facility will be assigned to us by Cendant prior to the completion of this offering. Our rent and related costs under these agreements were $1,079,000 for the nine months ended January 31, 2004, $970,000 in 2003 and $92,000 in 2002.

Preferred Alliance. Prior to this offering, we participated in Cendant’s preferred alliance program, under which Cendant earns a commission for our purchases of goods and services from certain preferred vendors. We expect that the third party agreements where we, and not Cendant or one of its affiliates, are the party to the relevant agreement will be assigned to us by Cendant prior to the completion of this offering. For the nine months ended January 31, 2004 and the years ended April 30, 2003 and 2002, Cendant allocated the costs of administration of the preferred alliance program to us through our share of Cendant’s general corporate overhead, which is discussed below.

Human Resources and Employee Benefits. Prior to this offering, Cendant provided us with human resources services, as well as the administration of Cendant’s compensation, retirement and benefits plans in which we participate, and will continue doing so under the transitional services agreement through December 31, 2004. Cendant has allocated the cost of these services to us based on the number of our employees and will continue to allocate these costs to us in this manner under the transitional services agreement. Following the completion of this offering, we will establish our own 401(k), life insurance and accidental death and dismemberment insurance benefit plans, among others. We were allocated costs for:

administration of Cendant’s health and welfare plans;

services Cendant’s executive officers performed for us based on the level of support they provided us for these services;

services provided to us by Cendant’s human resources service center based on our total number of employees; and

corporate recruiting, compensation support, corporate training and other programs.

Our allocated share of the cost of these services was $87,000 for the nine months ended January 31, 2004, $97,000 in 2003 and $110,000 in 2002, and we estimate the cost of these services under the transitional services agreement will be approximately $ per month through December 31, 2004. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services.

Payroll. Prior to this offering, Cendant provided us with payroll management services and will continue doing so under the transitional services agreement through December 31, 2004. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services. In addition, the transitional services agreement will include provisions for tax filings and the distribution of W-2s to our employees for the 2004 tax year. Cendant has allocated the cost of payroll management services to us based on the number of our employees and will continue to allocate these costs to us in this manner under the transitional services agreement. In addition, we will pay Cendant a one time management fee of $25,000 to manage the transition of our payroll processing to a third party provider. Our allocated share of the costs of these services was $20,000 for the nine months ended January 31,

2004, $23,000 in 2003 and $25,000 in 2002, and we estimate the cost of these services under the transitional services agreement will be approximately $ per month, excluding the one-time management fee.

Financial Systems Management. Prior to this offering, Cendant provided us with financial systems management and will continue doing so under the transitional services agreement through December 31, 2005. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services. For the nine months ended January 31, 2004, and the years ended April 30, 2003 and 2002, Cendant allocated the cost of these services to us through our share of Cendant’s general corporate overhead, which is discussed below. Under the transitional services agreement, Cendant will allocate these costs to us based on resources used and time spent for support services. We estimate the cost for these services under the transitional services agreement will be approximately $ per month. Following our separation from Cendant, we may need to purchase new licenses for software licensed from various third parties which may be required to operate our financial management systems.

Treasury and Cash Management. Prior to this offering, Cendant provided us with our treasury and cash management services and will continue doing so under the transitional services agreement through December 31, 2004. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services. For the nine months ended January 31, 2004 and the years ended April 30, 2003 and 2002, Cendant allocated the cost of these services to us through our share of Cendant’s general corporate overhead, which is discussed below. Under the transitional services agreement, we will pay Cendant a flat monthly fee of $ for these services, which will also include assisting us in establishing our own cash management system.

Accounts Payable Services. Prior to this offering, Cendant provided us with management of our accounts payable processing and will continue doing so under the transitional services agreement through December 31, 2005. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services. Cendant has allocated the cost of this service to us based on the number of transactions it processed for us and will continue to allocate these costs to us in this manner under the transitional services agreement. Our allocated share of costs for this service was $12,000 for the nine months ended January 31, 2004, $17,000 in 2003 and $30,000 in 2002, and we estimate the cost for these services under the transitional services agreement will be approximately $ per month.

Tax Support. Prior to this offering, Cendant provided us with corporate tax services. Cendant has allocated the cost of these services to us based on the number of tax returns prepared, an estimate of fees for tax consulting services attributable to us and other specialty tax services provided to us. Under the transitional services agreement, Cendant will provide corporate tax preparation services to us to complete our 2003 corporate tax return, the corporate tax return following the end of our 2004 fiscal year and the two-month period at the beginning of the 2005 fiscal year. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services. We expect to hire a tax manager to fulfill the tax planning and filing functions following the completion of this offering. Our allocated share of costs for these services was $100,000 for the nine months ended January 31, 2004, $90,000 in 2003 and $83,000 in 2002, and we estimate the cost for these services will be approximately $ for the remainder of 2004.

Event Marketing. Prior to this offering, Cendant provided us with event marketing services, such as arranging our annual franchisee conventions and other franchisee events, and will continue doing so under the transitional services agreement through December 31, 2005. Neither Cendant nor we have the ability to terminate these services prior to the expiration of the transitional services

agreement. Cendant has allocated the cost of these services to us based on the number of meetings and the number of attendees at meetings planned by this group for us and will continue to allocate costs to us in this manner under the transitional services agreement. Our allocated share of the cost for these services was $63,000 for the nine months ended January 31, 2004, $59,000 in 2003 and $56,000 in 2002, and we estimate the cost for these services under the transitional services agreement will be approximately $ annually.

Marketing. Prior to this offering, we participated in Cendant’s third party agreement for the purchase of national media advertising. We pay advertising costs directly to the third party vendor. In addition, Cendant allocated the costs of managing these agreements to us through our share of Cendant’s general corporate overhead, which is discussed below. We will need to negotiate our own agreements with media vendors following completion of this offering.

Revenue Audit Services. Prior to this offering, Cendant provided us with revenue audit services by internal auditors and will continue doing so under the transitional services agreement through December 31, 2005. We may terminate the provision of these services without penalty upon 30 days prior written notice to Cendant. Cendant may terminate providing these services to us, without penalty, after December 31, 2004 upon 120 days prior written notice to us. Cendant allocated the cost of these services to us based on the number of audits performed on our business and will continue to allocate costs to us in this manner under the transitional services agreement. Our allocated share of the costs for these services was $68,000 for the nine months ended January 31, 2004, $86,000 in 2003 and $55,000 in 2002, and we estimate the cost for these services under the transitional services agreement will be approximately $ annually.

Telecommunications Services. Prior to this offering, Cendant provided us with telecommunications services through arrangements it has with third-party providers and will continue doing so under the transitional services agreement as an unaffiliated entity until June 30, 2007. Both Cendant and we may terminate the provision of telecommunications services by Cendant, without penalty, upon 180 days written notice by the terminating party. We paid the third party providers directly for these services and our equipment use, and will continue to pay them in this manner under the transitional services agreement. We have also paid, and will continue under the transitional services agreement to pay, Cendant a management fee of $9,300 per month for use of the Cendant telecommunications group’s services. Our allocated share of the costs for telecommunications services, including the management fees, was $301,000 for the nine months ended January 31, 2004, $635,000 in 2003 and $600,000 in 2002, and we estimate the cost for these services under the transitional services agreement will be approximately $ per month.

Information Technology Services. Prior to this offering, Cendant provided us with information technology support and services at their data center in Denver, Colorado through a contract with a third party and will continue doing so under the transitional services agreement for a period of two years from the date of the completion of this offering. We may terminate the provision of these services upon 90 days written notice to Cendant, and we would be required to pay Cendant a penalty in an amount equal to the unamortized lease costs of computer hardware. Cendant does not have early termination rights with respect to these services. Cendant allocated the costs for these services to us based on usage and the level of support we received from these service providers and will continue to allocate costs to us in this manner under the transitional services agreement. Our allocated share of the costs for these services was $800,000 for the nine months ended January 31, 2004, $1.7 million in 2003 and $1.6 million in 2002, and we estimate the cost for these services under the transitional services agreement will be approximately $ per month.

Call Support Services. Prior to this offering, Cendant provided us with customer service support through its Aberdeen, South Dakota, call center and will continue doing so under the transitional services agreement until December 31, 2005. We may terminate the provision of these

services without penalty upon 60 days prior written notice to Cendant. Cendant may terminate providing these services to us, without penalty, after June 30, 2005 upon 120 days prior written notice to us. Cendant allocated the costs for call support based on the number of calls serviced for us in the call center and will allocate costs to us in the future based on the number of minutes incurred for the calls serviced for us under the transitional services agreement. Our allocated share of the costs for call support was $93,000 for the nine months ended January 31, 2004, $131,000 in 2003 and $139,000 in 2002, and we estimate the cost for these services under the transitional services agreement will be approximately $ per year.

Executive Support. Prior to this offering, Cendant provided us with executive support services through the support of Cendant’s Financial Services Division of which we are a part. Our allocated share of the costs for executive support was $167,000 for the nine months ended January 31, 2004, $175,000 in 2003 and $108,000 in 2002. Following the completion of this offering, we will no longer be required to pay these costs.

Public and Regulatory Affairs. Prior to this offering, Cendant provided us with public and regulatory services, including governmental affairs, and will continue doing so under the transitional services agreement until April 30, 2005. We may terminate the provision of these services without penalty upon 30 days written notice to Cendant. Cendant does not have early termination rights with respect to these services. For the nine months ended January 31, 2004 and the years ended April 30, 2003 and 2002, Cendant allocated the cost of these services to us through our share of Cendant’s general corporate overhead, which is discussed below. Under the transitional services agreement, we will pay Cendant for these services based on the time spent in providing such services. We estimate the cost for these services under the transitional services agreement will be approximately $ per month.

General Corporate Overhead. In addition to the services discussed above which are directly allocated to us by Cendant, certain corporate services are charged to us through Cendant’s general corporate overhead allocation, which is calculated based on a percentage of our revenues. These services include certain of those services discussed above, as well as purchasing, corporate travel services. Our share of the general corporate overhead was $1.4 million for the nine months ended January 31, 2004, $1.6 million in 2003 and $1.0 million in 2002.

Non-Solicitation and Non-Hire of Employees. We and Cendant have agreed that for a period of two years following the completion of this offering, neither of us will solicit or hire for employment each other’s existing employees with total base salary plus bonus of $150,000 or more, without the consent of the other party.

Equity-based Compensation

Historically, Cendant has made equity-based compensation grants to our named executive officers. During 2003, the aggregate value attributed to the grant of restricted stock units to our named executive officers as of the date of grant was $2 million, which is included in compensation expense in our financial statements over the vesting period. During the nine months ended January 31, 2004 and the year ended April 30, 2003, we recorded compensation expense of $365,000 and $10,000 respectively. See “Management—Summary Compensation Table.” In accordance with past practice, Cendant has not required that our named executive officers pay any purchase price for the restricted stock units, which were granted as long-term incentive compensation awards in respect of services rendered and to be rendered to us by these executives.

Special Dividend to be Paid to Cendant

Historically, we have not paid dividends to our parent, Cendant. Prior to this offering, we intend to declare a special dividend to Cendant in the amount of $ million to be paid concurrently with the closing of this offering. The $ million cash portion of this special dividend will be funded from the net proceeds of the notes offering. The remaining $ million consists of the cancellation of a receivable from Cendant. The receivable originated in January 1998 when we became a wholly owned subsidiary of Cendant and consists of funds generated from our operations that have been transferred to Cendant since that date, less expenses paid by Cendant on our behalf and less the current income taxes payable to Cendant associated with being included in Cendant’s consolidated income tax return.

Agreement with Wright Express

We have an agreement with Wright Express Financial Services Corporation, a subsidiary of Cendant, to provide the Jackson Hewitt CashCard to our customers. Under the agreement, Wright Express provides a MasterCard branded debit card under the Jackson Hewitt brand that allows our customers to receive their tax refund proceeds on the card. Wright Express prepares, produces and distributes to us the cards, cardholder agreements and related disclosures, establishes a cardholder relationship with the customer and manages the customer transactions. Wright Express pays us 50% of the net revenue, which includes interchange revenue received from MasterCard, cardholder fees and interest revenue, less transaction processing costs and direct program support charges incurred by Wright Express and third party vendors. The term of the agreement is through September 30, 2005. Under this agreement, the revenue we received for the nine months ended January 31, 2004 and the year ended April 30, 2003 was nominal.

PRINCIPAL AND SELLING STOCKHOLDER

As of the date of this prospectus, all 100 of our issued and outstanding shares of common stock are owned by Cendant through its wholly owned subsidiary, Cendant Finance Holding Corporation. Prior to this offering, we will effect a 375,000-for-one stock split. Following the stock split, Cendant will own 37,500,000 shares of our common stock, all of which will be sold in this offering. Cendant’s principal executive office is located at 9 West 57^th Street, New York, New York 10019.

DESCRIPTION OF CAPITAL STOCK

In connection with this offering, we intend to amend and restate our certificate of incorporation and by-laws. The following summary of our capital stock does not relate to our current certificate of incorporation or by-laws, but rather is a description of our capital stock pursuant to the amended and restated certificate of incorporation and by-laws that will be in effect immediately prior to this offering.

Our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.01 per share, and shares of preferred stock. Immediately prior to the completion of this offering, we will have 37,500,000 shares of common stock issued and outstanding and held of record by Cendant. In addition to the 37,500,000 shares to be sold by Cendant in this offering, there will be outstanding shares of common stock issued to our employees following completion of this offering as described under “Management—2004 Equity and Incentive Plan.” No shares of preferred stock are currently outstanding.

The following summary of certain provisions of the common stock and preferred stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of our certificate of incorporation which is included as an exhibit to the registration statement of which this prospectus is a part, and by the provisions of applicable law. See “Where You Can Find Additional Information.”

Common Stock

General

Each holder of common stock is entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Subject to preferences that may be granted to the holders of preferred stock, each holder of common stock is entitled to share ratably in distributions to stockholders and to receive ratably such dividends as may be declared by the board of directors out of funds legally available therefor, and, in the event of the liquidation or dissolution of the corporation, is entitled to share ratably in all assets of the corporation remaining after payment of liabilities. Holders of common stock have no conversion, preemptive or other subscription rights and there are no redemption rights or sinking fund provisions with respect to the common stock. The outstanding common stock is validly issued, fully paid, and non-assessable.

Subject to the rights and preferences of the holders of any shares of our preferred stock which may at the time be outstanding, holders of our common stock are entitled to such dividends as the board of directors may declare out of funds legally available. The holders of common stock will possess exclusive voting rights in us, except to the extent the board of directors specifies voting power with respect to any preferred stock issued. Except as described below, holders of common stock are entitled to one vote for each share of common stock, but will not have any right to cumulate votes in the election of directors. In the event of our liquidation, dissolution or winding up, the holders of common stock will be entitled to receive, after payment of all of our debts and liabilities and of all sums to which holders of any preferred stock may be entitled, the distribution of any of our remaining assets. Holders of common stock will not be entitled to preemptive rights with respect to any shares which may be issued. Any shares of common stock sold under this prospectus will be fully paid and non-assessable upon issuance against full payment of the purchase price for such shares. We intend to list our common stock on the .

Certain Provisions

Provisions of our certificate of incorporation, by-laws and Delaware law, which are summarized below, may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in such stockholder’s best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.

Classified Board of Directors. Our board of directors is divided into three classes serving staggered three-year terms, with one-third of the board being elected each year. Our classified board, together with certain other provisions of our certificate of incorporation authorizing the board to fill vacant directorships or increase the size of the board, may prevent a stockholder from removing, or delaying the removal of, incumbent directors, and simultaneously gaining control of the board by filling vacancies created by such removal with his own nominees.

Newly Created Directorships, Vacancies and Removal. Newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the board of directors remains. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director. Our certificate of incorporation provides that directors may be removed from office only for cause and only by the affirmative vote of holders of at least 60% of the shares then entitled to vote generally in an election of directors, voting together as a single class.

Special Meetings of Stockholders. A special meeting of stockholders may be called only by the Chairman of the board of directors, the President or the board of directors pursuant to a resolution approved by a majority of the entire board of directors.

Quorum at Stockholder Meetings. The holders of not less than one-third of the shares entitled to vote at any meeting of the stockholders, present in person or by proxy, shall constitute a quorum at all stockholder meetings.

Stockholder Action By Written Consent. Our certificate of incorporation provides that any action required or permitted to be taken by our stockholders at an annual or special meeting of stockholders must be effected at a duly called meeting and may not be taken or effected by a written consent of stockholders.

Advance Notice of Stockholder-Proposed Business at Annual Meetings. Our by-laws provide that for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to our Secretary. To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices, not less than 90 days nor more than 120 days prior to the anniversary date of the last annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within 25 days before or after the anniversary date, notice by the stockholder must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was first given to stockholders. A stockholder’s notice to the Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting:

a brief description of the business desired to be brought before the annual meeting;

the name and address, as they appear on our books, of the stockholder proposing such business;

the class and number of our shares which are beneficially owned by the stockholder;

a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of business by such stockholder and any material interest of the other person in the business; and

a representation that the stockholder intends to appear in person or by proxy at the meeting to bring the business before the meeting.

In addition, the by-laws provide that for a stockholder entitled to vote in the election of directors generally to properly nominate a director at a meeting of stockholders, the stockholder must have given timely notice thereof in writing to our secretary. To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices not later than:

in the case of an annual meeting, not less than 90 days nor more than 120 days prior to the anniversary date of the last annual meeting of our stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 25 days before or after the anniversary date of the last annual meeting, notice by the stockholder in order to be timely must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was first given to stockholders.

with respect to a special meeting of stockholders, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders.

Such stockholder’s notice to the secretary must set forth:

the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated;

a representation that the stockholder is the holder of record of Jackson Hewitt common stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate each such nominee;

a description of all arrangements between such stockholder and each nominee;

such other information with respect to each nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC; and

the consent of each nominee to serve as director of the company if so elected.

Amendments to By-Laws. Our certificate of incorporation provides that our board of directors or the holders of at least 60% of the voting power of all shares of our capital stock then entitled to vote generally in the election of directors, voting together as a single class, have the power to amend or repeal our by-laws.

Amendment of the Certificate of Incorporation. Any proposal to amend, alter, change or repeal any provision of our certificate of incorporation, except as may be provided in the terms of any preferred stock, requires approval by the affirmative vote of both a majority of the members of our board then in office and a majority vote of the voting power of all of the shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class. However, any proposal to amend, alter, change or repeal the provisions of our certificate of incorporation relating to:

the classification of our board;

removal of directors;

the prohibitions on stockholder action by written consent or stockholder calls for special meetings;

amendment of by-laws; or

amendment of the certificate of incorporation

requires approval by the affirmative vote of 60% of the voting power of all of the shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class.

Rights Plan. Each share of common stock has attached to it one right. Each right entitles the holder to purchase one one-thousandth of a share of a new series of our preferred stock designated as series A junior participating preferred stock at an exercise price of $ , subject to adjustment. The following summary description of the rights agreement does not purport to be complete and is qualified in its entirety by reference to the rights agreement between us and , as rights agent, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part and is incorporated herein by reference.

Rights will only be exercisable under limited circumstances specified in the rights agreement when there has been a distribution of the rights and such rights are no longer redeemable by us. A distribution of the rights would occur upon the earlier of:

10 business days, or such later date as our board of directors may determine, following a public announcement that any person or group, other than one involving Cendant, has acquired beneficial ownership of 15% or more of the outstanding shares our common stock, other than as a result of repurchases of stock by us or inadvertence by certain stockholders as set forth in the rights agreement; or

10 business days, or such later date as our board of directors may determine, after the date of the commencement or the date of first public announcement with respect thereto, whichever is earlier, of a tender offer or exchange offer that would result in any person, group or related persons acquiring beneficial ownership of 15% or more of the outstanding shares of our common stock.

The rights will expire at 5:00 P.M. (New York City time) on , 2014, unless such date is extended or the rights are earlier redeemed or exchanged by us.

If any person or group acquires shares representing 15% or more of the outstanding shares of our common stock, the “flip-in” provision of the rights agreement will be triggered and the rights will entitle a holder, other than such person, any member of such group or related person, as such rights will be null and void, to acquire a number of additional shares of our common stock having a market value of twice the exercise price of each right. If we are involved in a merger or other business combination transaction, each right will entitle its holder to purchase, at the right’s then-current exercise price, a number of shares of the acquiring or surviving company’s common stock having a market value at that time of twice the rights’ exercise price.

Up to and including the tenth business day following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 15% or more of the outstanding shares of our common stock, other than as a result of repurchases of stock by us, we may redeem the rights in whole, but not in part, at a price of $.01 per right, payable in cash, common stock or other consideration that we deemed appropriate. Promptly upon our election to redeem the rights, the rights will terminate and the only right of the holders of rights will be to receive the $.01 redemption price.

At any time after any person or group acquires 15% or more of outstanding shares of our common stock, and prior to the acquisition by such person or group of fifty percent (50%) or more of outstanding shares of our common stock, our board of directors may exchange the rights, other than rights owned by such person, group or related parties which have become void, in whole or in part, for our common stock at an exchange ratio of one share of common stock, for one one-thousandth of a share of our series A junior participating preferred stock of the right, or of a share of a class or series of our preferred stock or other security having equivalent rights, preferences and privileges, per right, subject to adjustment.

Until a right is exercised, the holder of the right, as such, will have no rights as a stockholder of our company, including, without limitation, no right to vote or to receive dividends. While the distribution of the rights will not be taxable to stockholders or to us, stockholders may, depending upon the circumstances, recognize taxable income in the event that the rights become exercisable for our common stock or other consideration or for common stock of the acquiring or surviving company or in the event of the redemption of the rights as set forth above.

Any of the provisions of the rights agreement may be amended by our board of directors prior to the distribution of the rights. After such distribution, the provisions of the rights agreement may be amended by our board of directors in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of rights or to shorten or lengthen any time period under the rights agreement. The foregoing notwithstanding, no amendment may be made at such time as the rights are not redeemable.

The existence of the rights agreement and the rights is intended to deter coercive or partial offers which may not provide fair value to all stockholders and to enhance our ability to represent all of our stockholders and thereby maximize stockholder value.

Delaware Law. We will be subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, those provisions prohibit a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:

prior to that date, the board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

upon consummation of the transaction that 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; or

on or after the date the business combination is approved by the board and authorized at a meeting of stockholders by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 defines “business combination” to include the following:

any merger or consolidation involving the corporation and the interested stockholder;

any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any of these entities or persons.

Dividends

Subject to the preferences, if any, of any series of preferred stock, holders of record of shares of common stock are entitled to receive dividends when, if and as may be declared by the board of directors out of funds legally available for such purposes.

Preferred Stock

The board of directors, without further action by the holders of common stock, may issue shares of preferred stock. The board of directors is vested with authority to fix by resolution the designations and the powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limitation, the dividend rate, conversion or exchange rights, redemption price and liquidation preference of any series of shares of preferred stock, and to fix the number of shares constituting any such series.

The authority possessed by the board of directors to issue preferred stock could potentially be used to discourage attempts by others to obtain control of the corporation through a merger, tender offer, proxy contest, or otherwise by making such attempts more difficult to achieve or more costly. The board of directors may issue preferred stock with voting and conversion rights that could adversely affect the voting power of the holders of common stock. There are no current agreements or understandings for the issuance of preferred stock and the board of directors has no present intention to issue any shares of preferred stock.

Limitation of Liability and Indemnification of Directors and Officers

As permitted by the Delaware General Corporation Law, we have adopted provisions in our certificate of incorporation that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

any breach of the director’s duty of loyalty to us or our stockholders;

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or

any transaction from which the director derived an improper personal benefit.

These limitations of liability do not generally affect the availability of equitable remedies such as injunctive relief or rescission. Our certificate of incorporation also authorize us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law and we may advance expenses to our directors, officers and employees in connection with a legal proceeding, subject to limited exceptions.

As permitted by the Delaware General Corporation Law, our certificate of incorporation and by-laws provide that:

we shall indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and

we may purchase and maintain insurance on behalf of our current or former directors, officers, employees or agents against any liability asserted against them and incurred by them in any such capacity, or arising out of their status as such.

We may enter into separate indemnification agreements with each of our directors which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements may require us, among other things, to indemnify our directors against liabilities that may arise by reason of their status or service as directors, other than liabilities arising from willful misconduct. These indemnification agreements may also require us to advance any expenses incurred by the directors as a result of any proceeding against them as to which they could be indemnified and to obtain directors’ and officers’ insurance if available on reasonable terms.

At present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification by us is sought, nor are we aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is The Bank of New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, shares of our common stock will be outstanding (assuming no exercise of the underwriters’ option to purchase up to an additional 5,625,000 shares). The 37,500,000 shares sold in this offering (43,125,000 shares if the underwriters exercise their option to purchase additional shares in full) will be freely tradable without restriction under the Securities Act of 1933, as amended, or the Securities Act, except for any such shares held at any time by an affiliate of us, as such term is defined under Rule 144 promulgated under the Securities Act.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person or persons whose shares are aggregated, who has beneficially owned restricted shares for at least one year, including persons who may be deemed to be our “affiliates,” would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

1.0% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or

the average weekly trading volume of our common stock on the during the four calendar weeks before a notice of the sale on Form 144 is filed.

Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of certain public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our “affiliates” at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an “affiliate,” is entitled to sell these shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Stock Options and Restricted Stock Grants

As described above under “Management—2004 Equity and Incentive Plan”, following the closing of this offering, we will issue shares of common stock and options to purchase shares of common stock. Following the consummation of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of common stock issued or reserved for issuance under our 2004 Equity and Incentive Plan. Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, shares of common stock registered under any such registration statement will be available for sale in the open market, unless such shares of common stock are subject to restrictions on transfer imposed by us or the lock-up restrictions described in this prospectus.

As of the date of this prospectus, we, our officers and our directors have agreed that we and they will not, directly or indirectly, offer, sell, offer to sell, contract to sell, grant any option to purchase or otherwise dispose of, loan, pledge or transfer (or announce any offer, sale, offer of sale, contract of sale, grant of any options to purchase or otherwise dispose of, loan, pledge or transfer) or grant any rights with respect to any shares of common stock or similar securities of the corporation or any securities convertible into, or exercisable or exchangeable for, any shares of common stock of the corporation without the prior written consent of the representatives of the underwriters, for a period of 180 days from the date of this prospectus; provided, however, that we may issue and sell common

stock pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment plan of ours in effect at the time of the pricing of this offering and pursuant to any non-employee director option plan, stock ownership plan or dividend reinvestment plan of ours in effect at the time of the pricing of this offering, and we may issue common stock issuable upon the conversion of securities or the exercise of warrants outstanding at the time of the pricing of this offering. In addition, the foregoing restriction shall not apply to the common stock being sold in this offering, securities issued in a transaction not requiring registration under the Securities Act (so long as the applicable recipient agrees in writing in a letter addressed to the representatives of the underwriters to be bound by the relevant terms of the underwriting agreement) or securities issued in public offerings as consideration in connection with acquisitions.

UNDERWRITING

Jackson Hewitt, Cendant and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are the representatives of the underwriters.


Underwriters		Number of Shares
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.








Total		37,500,000

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional 5,625,000 shares from Jackson Hewitt to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by Jackson Hewitt and Cendant. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

Paid by Jackson Hewitt

Paid by Cendant

No Exercise

Full Exercise

No Exercise

Full Exercise

Per Share

—

Total

—

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any such securities dealers may resell any shares purchased from the underwriters to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.

Jackson Hewitt currently anticipates that it will undertake a directed share program, pursuant to which it will direct the underwriters to reserve up to shares of common stock for sale at the initial public offering price through a directed share program. The number of shares of common stock available for sale to the general public in the public offering will be reduced to the extent these persons purchase any reserved shares. Any shares not so purchased will be offered by the underwriters to the general public on the same basis as other shares offered hereby.

Jackson Hewitt, its officers and directors and Cendant have agreed with the underwriters not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except for certain transactions described under “Shares Eligible For Future Sale” or with the prior written consent of the representatives.

Prior to this offering, there has been no public market for the shares. The initial public offering price will be negotiated among Jackson Hewitt, Cendant and the representatives of the underwriters. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be Jackson Hewitt’s historical performance, estimates of Jackson Hewitt’s business potential and earnings prospects, an assessment of Jackson Hewitt’s management and the consideration of the above factors in relation to market valuation of companies in related businesses.

Jackson Hewitt intends to list the common stock on the under the symbol “JTX.”

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Shorts sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from Jackson Hewitt in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the , in the over-the-counter market or otherwise.

Each underwriter has represented, warranted and agreed that: (i) it has not offered or sold and, prior to the expiry of a period of six months from the closing date, will not offer or sell any shares to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995;

(ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of any shares in circumstances in which section 21(1) of the FSMA does not apply to Jackson Hewitt; and (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

The shares may not be offered or sold, transferred or delivered, as part of their initial distribution or at any time thereafter, directly or indirectly, to any individual or legal entity in the Netherlands other than to individuals or legal entities who or which trade or invest in securities in the conduct of their profession or trade, which includes banks, securities intermediaries, insurance companies, pension funds, other institutional investors and commercial enterprises which, as an ancillary activity, regularly trade or invest in securities.

The shares may not be offered or sold by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the shares may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation or subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than under circumstances in which such offer, sale or invitation does not constitute an offer or sale, or invitation for subscription or purchase, of the shares to the public in Singapore.

Each underwriter has acknowledged and agreed that the shares have not been registered under the Securities and Exchange Law of Japan and are not being offered or sold and may not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and (ii) in compliance with any other applicable requirements of Japanese law.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

Cendant will pay the total expenses of the offering, which are estimated to be approximately $ . Jackson Hewitt will pay any expenses in connection with the exercise by the underwriters of their option to purchase additional shares.

Jackson Hewitt has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for Jackson Hewitt, for which they received or will receive customary fees and expenses. Concurrently with this

offering, Jackson Hewitt plans to issue $175 million aggregate principal amount of notes in a private placement for which J.P. Morgan will receive a placement fee and enter into a new credit facility for which J.P. Morgan will receive an arrangement fee and affiliates of several of the underwriters, including J.P. Morgan, will receive other fees.

LEGAL COUNSEL

We are being represented by Skadden, Arps, Slate, Meagher & Flom, LLP, New York, New York, in connection with this offering. Kirkland & Ellis LLP, New York, New York, will pass upon certain legal matters for the underwriters.

EXPERTS

The consolidated financial statements as of January 31, 2004, April 30, 2003 and 2002 and for the nine months ended January 31, 2004 and each of the three years in the period ended April 30, 2003, included in this prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of the fair value method of accounting for stock-based compensation on January 1, 2003 and the adoption of the non-amortization provisions for goodwill and other indefinite-lived intangibles on January 1, 2002) and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission, or SEC, a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, certain items of which are omitted as permitted by the rules and regulations of the SEC. For further information, reference is made to the registration statement and to the exhibits and schedules filed with it, which are available for inspection without charge at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of the material containing this information may be obtained from the SEC upon payment of the prescribed fees. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of this website is http://www.sec.gov. We expect that our annual and quarterly reports will be available on our website at http://www.jacksonhewitt.com.

Upon completion of this offering, we will become subject to the periodic reporting and other information requirements of the Exchange Act and will file periodic reports, proxy statements and other information with the SEC. Such reports may be inspected at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC’s regional office located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained by mail from the Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Index to Consolidated Financial Statements


		Page
Independent Auditors’ Report		F-1

Consolidated Balance Sheets		F-2

Consolidated Statements of Operations		F-3

Consolidated Statements of Stockholder’s Equity		F-4

Consolidated Statements of Cash Flows		F-5

Notes to Consolidated Financial Statements		F-6

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholder of Jackson Hewitt Inc.:

We have audited the accompanying consolidated balance sheets of Jackson Hewitt Inc. (the “Company”), a wholly-owned subsidiary of Cendant Corporation, as of January 31, 2004, April 30, 2003 and 2002, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the nine months ended January 31, 2004 and each of the three years in the period ended April 30, 2003. 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 auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at January 31, 2004, April 30, 2003 and 2002, and the consolidated results of its operations and its cash flows for the nine months ended January 31, 2004 and each of the three years in the period ended April 30, 2003 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, on January 1, 2003, the Company adopted the fair value method of accounting for stock-based compensation. Also, as discussed in Note 2, on January 1, 2002, the Company adopted the non-amortization provisions for goodwill and other indefinite-lived intangible assets.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

March 12, 2004

F-1

JACKSON HEWITT INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	As of January 31, 2004		As of April 30,
	As of January 31, 2004		2003		2002
ASSETS
Current assets:
Cash and cash equivalents	$	8,403	$	1,543	$	2,312
Accounts receivable (net of allowance for doubtful accounts of $2,916, $5,226, and $4,393)		44,595		20,355		32,453
Notes receivable, net		1,636		1,824		682
Prepaid expenses and other		3,386		2,344		1,200
Deferred income taxes		4,873		6,141		6,659

Total current assets		62,893		32,207		43,306

Property and equipment, net		39,459		42,148		45,755
Goodwill		393,064		391,004		386,835
Other intangibles, net		90,578		91,213		93,987
Due from Cendant		55,355		93,664		42,322
Notes receivable, net		6,887		1,555		1,507
Other non-current assets		10,421		10,110		4,087

Total assets	$	658,657	$	661,901	$	617,799

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	30,667	$	20,944	$	22,699

Total current liabilities		30,667		20,944		22,699

Deferred income taxes		15,622		23,134		22,265
Other non-current liabilities		9,703		5,687		1,832

Total liabilities		55,992		49,765		46,796

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDER’S EQUITY
Series A convertible preferred stock, no par stated value—authorized 1,000,000 shares; no shares issued and outstanding		—		—		—
Common stock, $.02 par value—authorized 30,000,000 shares; issued and outstanding, 6,655,505 shares		133		133		133
Additional paid-in capital		476,086		476,086		476,086
Retained earnings		126,446		135,917		94,784

Total stockholder’s equity		602,665		612,136		571,003

Total liabilities and stockholder’s equity	$	658,657	$	661,901	$	617,799

See Notes to Consolidated Financial Statements.

F-2

JACKSON HEWITT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)


	For the Nine Months Ended January 31,						For the Years Ended April 30,
	2004			2003			2003		2002		2001
				(Unaudited)
Revenues
Royalty and advertising revenue	$	25,470		$	20,778		$	63,900	$	52,901	$	45,749
Service revenue from Company-owned office operations		20,995			16,580			48,420		41,252		—
Financial product fees		11,624			9,216			25,037		21,635		16,618
Other financial product revenue		6,678			5,554			23,110		29,518		3,447
Other		8,077			6,886			11,080		11,685		9,691

Net revenues		72,844			59,014			171,547		156,991		75,505

Expenses
Operating		38,911			32,065			53,155		37,208		12,861
Marketing and advertising		18,334			15,563			25,086		18,836		13,474
Selling, general and administrative		22,660			11,648			14,997		17,882		13,955
Depreciation and amortization		8,941			8,478			11,523		12,824		13,990

Total expenses		88,846			67,754			104,761		86,750		54,280

Income (loss) from operations		(16,002	)		(8,740	)		66,786		70,241		21,225
Other income:
Interest income, net of interest expense of $472, $39, $36, $38 and $2		287			671			791		1,449		1,842
Preferred stock dividends from Tax Services of America		—			—			—		1,768		1,181

Income (loss) before income taxes		(15,715	)		(8,069	)		67,577		73,458		24,248
Provision for (benefit from) income taxes		(6,244	)		(3,154	)		26,444		30,935		13,298

Net income (loss)	$	(9,471	)	$	(4,915	)	$	41,133	$	42,523	$	10,950

See Notes to Consolidated Financial Statements.

F-3

JACKSON HEWITT INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(In thousands)


	Common Stock			Additional Paid-in Capital		Retained Earnings			Total Stockholder’s Equity
	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Total Stockholder’s Equity
Balance May 1, 2000	6,656	$	133	$	476,086	$	41,311		$	517,530
Net income	—		—		—		10,950			10,950

Balance, April 30, 2001	6,656		133		476,086		52,261			528,480
Net income	—		—		—		42,523			42,523

Balance, April 30, 2002	6,656		133		476,086		94,784			571,003
Net income	—		—		—		41,133			41,133

Balance, April 30, 2003	6,656		133		476,086		135,917			612,136
Net loss	—		—		—		(9,471	)		(9,471	)

Balance, January 31, 2004	6,656	$	133	$	476,086	$	126,446		$	602,665

See Notes to Consolidated Financial Statements.

F-4

JACKSON HEWITT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Nine Months Ended January 31,						For the Years Ended April 30,
	2004			2003			2003			2002			2001
				(Unaudited)
Operating Activities:
Net income (loss)	$	(9,471	)	$	(4,915	)	$	41,133		$	42,523		$	10,950
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		8,941			8,478			11,523			12,824			13,990
Loss on disposal of assets		—			878			1,117			139			—
Amortization of development advances		628			219			216			249			—
Preferred stock dividends from Tax Services of America		—			—			—			(1,768	)		(1,181	)
Provision for uncollectible receivables		581			2,116			3,558			3,856			1,243
Deferred income taxes		(6,244	)		(3,154	)		1,387			(3,828	)		(1,295	)
Changes in assets and liabilities, excluding the impact of acquisitions:
Accounts receivable		(24,821	)		(2,311	)		8,540			(31,207	)		1,075
Notes receivable		(5,144	)		(7,513	)		(1,190	)		(13,683	)		4,306
Prepaid expenses and other		(1,042	)		280			(1,144	)		(855	)		280
Other non-current assets		534			(1,176	)		(2,833	)		(1,227	)		—
Accounts payable and accrued liabilities		9,723			(2,521	)		(1,755	)		7,054			2,095
Other non-current liabilities		4,016			1,570			3,855			(424	)		(22	)

Net cash provided by (used in) operating activities		(22,299	)		(8,049	)		64,407			13,653			31,441

Investing Activities:
Capital expenditures		(3,774	)		(4,562	)		(5,228	)		(22,666	)		(20,697	)
Funding of development advances		(1,473	)		(255	)		(3,406	)		(2,149	)		(853	)
Net assets acquired (net of cash overdraft of $270 in 2002)		(3,903	)		(4,960	)		(5,200	)		(3,870	)		—
Investment in Tax Services of America		—			—			—			(4,360	)		(23,228	)

Net cash used in investing activities		(9,150	)		(9,777	)		(13,834	)		(33,045	)		(44,778	)

Financing Activities:
(Increase)/decrease in due from Cendant		38,309			23,774			(51,342	)		20,687			12,126

Net cash provided (used in) financing activities		38,309			23,774			(51,342	)		20,687			12,126

Net increase (decrease) in cash and cash equivalents		6,860			5,948			(769	)		1,295			(1,211	)
Cash and cash equivalents, beginning of period		1,543			2,312			2,312			1,017			2,228

Cash and cash equivalents, end of period	$	8,403		$	8,260		$	1,543		$	2,312		$	1,017

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	1		$	—		$	9		$	2		$	—

See Notes to Consolidated Financial Statements.

F-5

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

1. BASIS OF PRESENTATION

Jackson Hewitt Inc. provides computerized preparation of federal and state personal income tax returns through a network of franchised and company-owned offices. The consolidated financial statements include the accounts and transactions of Jackson Hewitt Inc. and its subsidiaries (“Jackson Hewitt”), as well as entities in which Jackson Hewitt’s ownership exceeds fifty percent of the outstanding voting shares of an entity and/or if the Company has the ability to control the financial or operating policies of an entity through its voting rights, board representation or other similar rights, (collectively, the “Company”). For more information regarding the Company’s consolidation policy, refer to Note 2 – Summary of Significant Accounting Policies.

The Company is a wholly-owned subsidiary of Cendant Corporation (“Cendant”). In presenting the consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.

The Company’s fiscal year ends April 30th, which differs from Cendant’s fiscal year-end of December 31st. The adoption of new accounting pronouncements coincides with Cendant’s fiscal year-end.

The consolidated statements of operations and cash flows and the related notes thereto for the nine months ended January 31, 2003 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal, recurring adjustments necessary to fairly present the results of operations and cash flows for the nine months ended January 31, 2003) have been made.

The Company’s comprehensive income is comprised solely of net income.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy. On January 17, 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). Such Interpretation addresses the consolidation of variable interest entities (“VIEs”), including special purpose entities (“SPEs”) that are not controlled through voting interests or in which the equity investors do not bear the residual economic risks and rewards. The provisions of FIN 46 were effective immediately for transactions entered into by the Company subsequent to January 31, 2003 and became effective for all other transactions as of July 1, 2003. However, in October 2003, the FASB permitted companies to defer the July 1, 2003 effective date to December 31, 2003 in whole or in part. On December 24, 2003, the FASB issued a complete replacement of FIN 46 (“FIN 46R”), which clarified certain complexities of FIN 46 and generally requires adoption no later than December 31, 2003 for entities that were considered SPEs under previous guidance, and no later than March 31, 2004 for all other entities. The Company adopted FIN 46R in its entirety as of December 31, 2003 even though adoption for non-SPEs was not required until March 31, 2004.

In connection with its Jackson Hewitt franchise arrangements, the Company has provided some level of financial support to certain of its franchisees in the form of loans and/or development advances. Based on its analyses, the Company has concluded that it is not the primary beneficiary under these franchise agreements and therefore does not consolidate the operations of such franchisees under the provisions of FIN 46R. However, with respect to the franchisees for which

F-6

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

financial support has been provided, the Company believes that it has a significant variable interest. At January 31, 2004, the Company had provided financial support, in the form of loans and advances, in the amount of $18,333 to 350 franchisees (see Note 6—Notes Receivable, net and Note 7—Development Advances). Such amount represents the Company’s maximum exposure to losses.

Stock-Based Compensation. Under Cendant’s existing stock plans, Cendant common stock awards are granted to the Company’s employees. Prior to January 1, 2003, the Company measured its stock-based compensation using the intrinsic value approach under Accounting Principles Board (“APB”) Opinion No. 25, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” Accordingly, the Company did not recognize compensation expense upon the issuance of its stock options to employees because the option terms were fixed and the exercise price equaled the market price of the underlying common stock on the date of grant. Therefore, the Company was not allocated compensation expense upon Cendant’s issuance of common stock options to the Company’s employees.

On January 1, 2003, the Company (in conjunction with Cendant’s adoption) adopted the fair value method of accounting for stock-based compensation provisions of SFAS No. 123, which is considered by the FASB to be the preferable accounting method for stock-based employee compensation. The Company also adopted SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” in its entirety on January 1, 2003, which amended SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting provisions. As a result, the Company now expenses all employee stock awards over their vesting periods based upon the fair value of the award on the date of grant. As the Company elected to use the prospective transition method, Cendant has allocated expense to the Company only for employee stock awards that were granted or modified subsequent to December 31, 2002.

F-7

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

The following table illustrates the effect on net income as if the fair value based method had been applied to all employee stock awards granted by Cendant to the Company’s employees for all periods presented:


	For the Nine Months Ended January 31,						For the Years Ended April 30,
	2004			2003			2003			2002			2001
				(Unaudited)
Reported net income (loss)	$	(9,471	)	$	(4,915	)	$	41,133		$	42,523		$	10,950
Add back: Stock-based employee compensation expense included in reported net income (loss), net of tax ^(a)		228			—			6			—			—
Less: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax ^(b)		(600	)		(5,756	)		(6,032	)		(3,598	)		(2,925	)

Pro forma net income (loss)	$	(9,843	)	$	(10,671	)	$	35,107		$	38,925		$	8,025

^(a)	For a detailed account of compensation expense recorded within the consolidated statements of operations for stock awards granted by Cendant subsequent to December 31, 2002, see Note 13—Stock-Based Compensation.

^(b)

The 2003 amounts reflect the August 27, 2002 acceleration of the vesting schedules for certain options previously granted by Cendant (see Note 13—Stock Based Compensation). Pro forma compensation expense reflected for grants awarded prior to January 1, 2003 is not indicative of future compensation expense that would be recorded by the Company, as future expense will vary based upon factors such as the type of award granted by Cendant or the Company and the then-current fair market value of such award.

Costs Associated with Exit or Disposal Activities. On January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Such standard nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Under SFAS No. 146, a liability related to an exit or disposal activity (including restructurings) initiated after December 31, 2002 is not recognized until such liability has actually been incurred whereas under EITF Issue No. 94-3 a liability was recognized at the date of commitment to an exit or disposal plan. The impact of adopting this standard was not material to the Company’s results of operations or financial position.

Guarantees. On January 1, 2003, the Company adopted FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” in its entirety. Such Interpretation elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of certain guarantees issued or modified after December 31, 2002, a liability for the fair value of the obligation undertaken in issuing the guarantee. The impact of adopting this Interpretation was not material to the Company’s results of operations or financial position.

F-8

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

Goodwill and Identifiable Intangible Assets. On January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” in its entirety. Prior to the adoption, all intangible assets (including goodwill) were amortized over the estimated periods to be benefited, on a straight-line or accelerated basis. Therefore, the results of operations for the fiscal years ended April 30, 2002 and 2001 reflect the amortization of goodwill and indefinite-lived intangible assets through December 31, 2001, while the results of operations for the nine months ended January 31, 2004 and the year ended April 30, 2003 do not reflect such amortization (see below for pro forma disclosure depicting the Company’s results of operations during 2002 and 2001 after applying the non-amortization provisions of SFAS No. 142). In connection with SFAS No. 142, the Company is required to assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred.

The Company assesses goodwill for such impairment by comparing the carrying value of its reporting units to their fair values. The Company’s reporting units are the same as its reportable operating segments. The Company determines the fair value of its reporting units utilizing discounted cash flows and incorporates assumptions that it believes marketplace participants would utilize. When available and as appropriate, the Company uses comparative market multiples to corroborate the discounted cash flow results. The Company’s amortizable intangible assets are tested for impairment based on the comparison of its undiscounted cash flows to its carrying amounts and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Indefinite-lived intangible assets are tested for impairment and written down to fair value, as required by SFAS No. 142.

The Company performed its initial impairment assessment on January 1, 2002 in connection with the adoption of SFAS No. 142 and determined that the carrying amounts of its reporting units did not exceed their respective fair values. Accordingly, the initial implementation of this standard did not result in a charge and, as such, did not impact the Company’s results of operations during 2002. Subsequent to the initial assessment, the Company has performed its review annually, or more frequently if circumstances indicated impairment may have occurred, and during the nine months ended January 31, 2004 and the years ended April 30, 2003 and 2002, determined that no such impairment had occurred.

Had the Company applied the non-amortization provisions of SFAS No. 142 commencing May 1, 2000, net income would have been as follows for 2002 and 2001:


	Years Ended April 30,
	2002		2001
Reported net income	$	42,523	$	10,950
Add back: Goodwill amortization		6,260		9,381
Add back: Trademark amortization, net of tax		910		1,328

Pro forma net income	$	49,693	$	21,659

Impairment or Disposal of Long-Lived Assets. On January 1, 2002, the Company adopted SFAS No. 144, which supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and replaces the accounting and reporting provisions of APB Opinion No. 30, “Reporting Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” as it relates to the disposal of a segment of a business. SFAS No. 144 requires the use

F-9

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

of a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations, by requiring those long-lived assets to be measured at the lower of carrying amount or fair value less cost to sell. The impairment recognition and measurement provisions of SFAS No. 121 were retained for all long-lived assets to be held and used with the exception of goodwill and indefinite-lived intangible assets, but including amortizable intangible assets.

The Company evaluates the recoverability of its long-lived assets (which included goodwill and indefinite-lived intangible assets prior to the adoption of SFAS No. 144) by comparing the respective carrying values of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. Property and equipment is evaluated separately within each segment. The adoption of this standard had no impact on the Company’s results of operations or financial position.

Cash Equivalents. The Company considers highly liquid unrestricted investments purchased with an original maturity of three months or less to be cash equivalents.

Property and Equipment. Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed utilizing the straight-line method over the estimated useful lives of the related assets. Amortization of leasehold improvements is computed utilizing the straight-line method over the estimated benefit period of the related assets or the lease term, if shorter. Useful lives generally range from 4 to 7 years for furniture, fixtures and equipment, from 3 to 10 years for computer software and from 2 to 15 years for leasehold improvements.

Revenue Recognition. Revenue that the Company earns is comprised of the following components:

Royalty and Advertising Revenue: The Company earns royalty and advertising revenue from its franchisees. The Company’s franchise agreements require franchisees to pay royalty and advertising fees based on their revenue. Royalty and advertising revenue is recognized upon the reporting of the revenue related to the completion of tax returns prepared by the Company’s franchisees.

Service Revenue: Service revenue includes only revenue earned at company-owned offices and primarily consists of fees that the Company earns directly from customers for the preparation of tax returns. Service revenue is recognized upon the completion of tax returns prepared at company-owned offices.

Financial Product Fees: The Company facilitates the sale of refund based financial products including refund anticipation loans, accelerated check refunds and assisted direct deposit for which it earns a fixed fee from the financial institutions who provide the products. These financial products are offered pursuant to contractual arrangements with financial institutions. In addition, the Company offers other products including an extended warranty product. The Company recognizes revenue for the fixed fees that it earns upon the sale of the financial products to its customers. Revenue attributable to the Company’s extended warranty product is deferred and recognized ratably over the term of the extended warranty.

Other Financial Product Revenue: Other financial product revenue represents revenue the Company earns equal to a portion of the difference between finance fees paid by customers to the

F-10

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

financial institutions and loan amounts that the financial institutions are unable to collect. This revenue is in addition to the fixed fees earned from the facilitation of refund anticipation loans. The finance fee is calculated as a percentage of the total loan amount (subject to a minimum and maximum fee). The finance fees are maintained by the financial institutions as a reserve against uncollected loans. Other financial product revenue is recognized only to the extent that the reserves maintained by the lending financial institutions exceed the uncollected loans made by these financial institutions at the end of each reporting period.

Other Revenue: Other revenue primarily consists of revenue that the Company earns from the sale of territories to franchisees (“initial franchise fees”). Revenue is recognized when all material services or conditions relating to the sale have been performed (generally upon completion of a mandatory initial training program).

Marketing and Advertising Expenses. Marketing and advertising costs are expensed in the period the advertising occurs. Advertising expense totaled $12,968 and $11,964 for the nine months ended January 31, 2004 and 2003, respectively, and $18,016, $11,816 and $9,883 for the years ended April 30, 2003, 2002, and 2001, respectively.

3. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of:


	As of January 31, 2004			As of April 30,
	As of January 31, 2004			2003			2002
Computer software	$	41,843		$	41,295		$	39,519
Furniture, fixtures and equipment		10,896			8,606			5,611
Leasehold improvements		4,385			3,766			3,543
Software under development		291			—			1,354

		57,415			53,667			50,027
Less accumulated depreciation and amortization		(17,956	)		(11,519	)		(4,272	)

Total	$	39,459		$	42,148		$	45,755

F-11

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

4. GOODWILL AND OTHER INTANGIBLES, NET

Intangible assets consists of:


	As of January 31, 2004							As of April 30, 2003
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets
Franchise agreements ^(a)	$	16,052	$	(9,178	)	$	6,874	$	15,000	$	(8,000	)	$	7,000
Customer relationships ^(b)		6,664		(3,960	)		2,704		5,871		(2,658	)		3,213

	$	22,716	$	(13,138	)	$	9,578	$	20,871	$	(10,658	)	$	10,213

Unamortized intangible assets
Goodwill ^(c)	$	393,064						$	391,004

Jackson Hewitt trademark ^(c)	$	81,000						$	81,000



	As of April 30, 2002
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets
Franchise agreements ^(a)	$	15,000	$	(6,500	)	$	8,500
Customer relationships ^(b)		5,079		(592	)		4,487

	$	20,079	$	(7,092	)	$	12,987

Unamortized intangible assets
Goodwill ^(c)	$	386,835

Jackson Hewitt trademark ^(c)	$	81,000

^(a)	Amortized over a period of 10 years.

^(b)	Amortized over a period of 5 years.

^(c)	Amortized over a period of 40 years until January 1, 2002.

F-12

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

The changes in the carrying amount of goodwill by segment are as follows:


	Franchise Operations			Company- Owned Office Operations		Total
Balance at May 1, 2001	$	343,027		$	—	$	343,027
Additions^(a)		—			50,068		50,068
Amortization		(6,260	)		—		(6,260	)

Balance at April 30, 2002		336,767			50,068		386,835
Additions		—			4,169		4,169

Balance at April 30, 2003		336,767			54,237		391,004
Additions		—			2,060		2,060

Balance at January 31, 2004	$	336,767		$	56,297	$	393,064

^(a)

Relates to the acquisition of Tax Services of America, Inc. (“TSA”), see Note 9- Acquisitions for further information.

Amortization expense relating to all intangible assets was as follows:


	For the Nine Months Ended January 31,				For the Years Ended April 30,
	2004		2003		2003		2002		2001
			(Unaudited)
Goodwill	$	—	$	—	$	—	$	6,260	$	9,381
Trademarks		—		—		—		1,500		2,250
Franchise agreements		1,178		1,125		1,500		1,500		1,500
Customer relationships		1,302		1,572		2,066		592		—

Total	$	2,480	$	2,697	$	3,566	$	9,852	$	13,131

Based on the Company’s amortizable intangible assets as of January 31, 2004, the Company expects related amortization expense for the three months ending April 30, 2004 and for the years ending April 30, 2005, 2006, 2007 and 2008 to approximate $712, $2,673, $2,411, $2,168 and $1,727, respectively.

F-13

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

5. FRANCHISING ACTIVITIES

The number of owned and franchised offices in operation are as follows:


	As of January 31, 2004		As of April 30,
	As of January 31, 2004		2003		2002		2001
Company-owned
Beginning balance	523		440		—		—
Additions	119		83		—		—
Disposals	—		—		—		—
Transfers from TSA	—		—		440		—

Ending balance	642		523		440		—

Franchised
Beginning balance	3,776		3,385		3,345		2,802
Additions	980		900		755		809
Disposals	(461	)	(509	)	(275	)	(266	)
Transfers to TSA	—		—		(440	)	—

Ending balance	4,295		3,776		3,385		3,345

Initial franchise fees totaled $5,989 and $5,204 in the nine months ended January 31, 2004 and 2003, respectively, and $5,908, $5,830 and $5,821 for the years ended April 30, 2003, 2002 and 2001, respectively, and are included in other revenues on the consolidated statements of operations.

Advertising revenue earned from franchisees totaled $8,181 and $6,706 for the nine months ended January 31, 2004 and 2003, respectively, and $20,671, $17,260 and $15,074 for the years ended April 30, 2003, 2002 and 2001, respectively, and is included in royalty and advertising revenue on the consolidated statement of operations.

6. NOTES RECEIVABLE, NET

The Company finances a portion of the initial franchise fee associated with new territory sales under promissory notes receivable from franchisees. These notes accrue interest annually, ranging from 8% to 12%, and are typically due in four annual installments, including accrued interest, at February 28th each year. These notes are recorded on the Company’s consolidated balance sheets at cost, and are reviewed for collectibility based on the underlying franchisee’s payment history, financial status and revenue base. The resulting provision is included within operating expense on the Company’s consolidated statements of operations.


	As of January 31, 2004			As of April 30,
	As of January 31, 2004			2003			2002
Notes receivable	$	11,608		$	8,028		$	8,033
Less allowance for uncollectible amounts		(3,085	)		(4,649	)		(5,844	)

Notes receivable, net		8,523			3,379			2,189
Less current portion		1,636			1,824			682

Notes receivable, net—non-current	$	6,887		$	1,555		$	1,507

F-14

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

7. DEVELOPMENT ADVANCES

The Company maintains a program to advance monies to independent tax practices to assist in the conversion of their operations to the Jackson Hewitt brand and to further expand their businesses. These development advances are capitalized and made in the form of promissory notes that are forgivable over a 10-year period subject to the achievement of certain performance standards. Advances were $6,725, $5,820 and $2,653 at January 31, 2004 and April 30, 2003 and 2002, respectively, and are included in other non-current assets on the consolidated balance sheets.

8. RELATED PARTIES

The Company is allocated certain expenses from Cendant for corporate-related functions including executive management, finance, human resources, information technology, legal and facility related expenses. Cendant allocates general corporate overhead to subsidiaries conducting ongoing operations based on a percentage of the subsidiaries’ forecasted revenues and allocates other corporate expenses that directly benefit the Company based on the Company’s actual utilization of the services. Such expenses were $2,924, $3,011, $3,959, $3,138 and $1,548 during the nine months ended January 31, 2004 and 2003 and the years ended April 30, 2003, 2002 and 2001, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

As part of these corporate support functions, Cendant pays the Company’s employees and vendors and uses excess funds swept from the Company’s bank accounts to fund these disbursements. The major categories of intercompany activity between the Company and Cendant were as follows:


	For the Nine Months Ended January 31,						For the Years Ended April 30,
	2004			2003			2003			2002			2001
				(unaudited)
Corporate allocations	$	(2,924	)	$	(3,011	)	$	(3,959	)	$	(3,138	)	$	(1,548	)
Payroll and related		(16,106	)		(15,648	)		(20,569	)		(17,206	)		(13,738	)
Accounts payable funding		(38,329	)		(22,513	)		(42,043	)		(49,001	)		(47,779	)
TSA investment funding		—			—			—			(21,443	)		(26,116	)
Income taxes		152			751			(24,168	)		(34,734	)		(14,564	)
Cash sweeps		18,898			16,647			142,081			104,835			91,619

Increase/(decrease) in due from Cendant	$	(38,309	)	$	(23,774	)	$	51,342		$	(20,687	)	$	(12,126	)

The Company also earned commissions and access fees from preferred vendor agreements through Cendant. Commissions and access fees directly attributable to the Company and its franchisees are allocated to the Company through the Due from Cendant account. Revenues from these agreements were $824, $191, $302, $1,000 and $439 for the nine months ended January 31, 2004 and 2003 and the years ended April 30, 2003, 2002 and 2001, respectively, and are included in other revenue on the consolidated statements of operations.

F-15

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

During the year ended April 30, 2003, the Company entered into an agreement with Wright Express Financial Services Corporation, a subsidiary of Cendant, to provide a debit card product to the Company’s customers. The term of the agreement is through September 30, 2005. Revenues recorded under this agreement were not material for the nine months ended January 31, 2004 and the year ended April 30, 2003.

9. ACQUISITIONS

Assets acquired and liabilities assumed in business combinations were recorded on the Company’s consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by the Company have been included in the Company’s consolidated statements of operations since their respective dates of acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill.

Tax Services of America, Inc. On January 18, 2002, the Company acquired all of the outstanding common stock of TSA for $3,600.

The allocation of the purchase price is summarized as follows:


	Amount
Cash consideration	$	3,600
Book value of Jackson Hewitt’s existing net investment in TSA		37,309
Amounts due Jackson Hewitt from TSA		24,830

Jackson Hewitt’s basis in TSA		65,739
Fair value of net assets acquired		(15,671	)

Excess purchase price over fair value of assets acquired and liabilities assumed	$	50,068

The following table summarizes the estimated fair values of the TSA assets acquired and liabilities assumed at the date of acquisition:


	Amount
Total current assets	$	24
Property and equipment, net		3,376
Intangible assets		5,079
Goodwill		50,068
Deferred income taxes		13,959

Total assets acquired		72,506


Total current liabilities		6,640
Long-term debt		127

Total liabilities assumed		6,767


Net assets acquired	$	65,739

The goodwill was assigned to the company-owned office operations segment.

F-16

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

Prior to the acquisition, TSA operated under a franchise agreement with the Company and was a joint venture between the Company and two of its largest franchisees. TSA acquired independent tax preparation practices and converted them to the Company’s tax service brand. In 1999, the Company initially funded TSA with 80 tax preparation locations and $5,000 in cash in exchange for a non-voting preferred stock investment. Simultaneously with the Company’s contribution to TSA, the Company’s joint venture partners contributed a total of 40 tax preparation locations to TSA in exchange for shares of common stock of TSA.

The Company earned a 12% royalty fee and a 6% advertising fee on the net revenues of TSA, pursuant to the terms of the franchise agreement. For the period May 1, 2001 through January 18, 2002 (the date of acquisition) and for the year ended April 30, 2001, such fees were $186 and $5,413, respectively. Such amounts were recorded on the Company’s consolidated statements of operations within royalty and advertising revenue. In addition, the Company earned initial franchise fee revenue on new territory sales to TSA, which approximated $875 for the period May 1, 2001 through January 18, 2002 and $1,995 for the year ended April 30, 2001. Such amounts are recorded on the Company’s consolidated statements of operations within other revenue.

The Company also provided administrative services to TSA and made payments for services on TSA’s behalf totaling $512 for the period from May 1, 2001 through January 18, 2002 and $152 for 2001.

The following unaudited pro forma information combines the results of operations of the Company and TSA for the years ended April 30, 2002 and 2001 calculated as if the acquisition had occurred on May 1st of each period presented. The pro forma information has been prepared for comparative purposes only and does not give effect to any synergies expected to result from the acquisition of TSA. The pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisition been consummated at the beginning of 2001 or of the results that may occur in the future. Net revenues, income from operations and net income would have been as follows had the acquisition of TSA occurred on May 1st of each period presented:


	Years Ended April 30,
	2002		2001
	(Unaudited)
Net revenues	$	156,941	$	99,080
Income from operations		47,347		16,053
Net income		28,247		8,269

Other Acquisitions. During the nine months ended January 31, 2004 and the year ended April 30, 2003, the Company acquired seven and 13, respectively, independent tax preparation operations for $3,903 and $5,200, respectively, in cash, which resulted in $2,060 and $4,169, respectively, in goodwill (allocated to the company-owned office operations segment). These acquisitions were not significant to the Company’s results of operations, financial position or cash flows.

F-17

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of each period end consists of:


	As of January 31, 2004		As of April 30,
	As of January 31, 2004		2003		2002
Accounts payable	$	5,323	$	1,945	$	4,107
Accrued payroll and related		6,989		7,046		8,078
Legal settlement		3,931		—		—
Deferred warranty income		2,940		2,205		859
Accrued marketing and advertising		7,024		7,018		4,080
Accrued purchase price		2,120		1,356		2,126
Other accrued liabilities		2,340		1,374		3,449

	$	30,667	$	20,944	$	22,699

11. INCOME TAXES

The Company is included in the consolidated federal income tax return of Cendant. In addition, the Company files unitary and combined state income tax returns with Cendant in jurisdictions where required. The provision for income taxes is computed as if the Company filed its federal and state tax returns on a stand-alone basis.

The provision for (benefit from) income taxes consists of:


	For the Nine Months Ended January 31,						For the Years Ended April 30,
	2004			2003			2003		2002			2001
				(Unaudited)
Current
Federal	$	—		$	—		$	21,105	$	29,137		$	12,099
State		—			—			3,952		5,626			2,494

		—			—			25,057		34,763			14,593

Deferred
Federal		(5,037	)		(2,530	)		1,110		(3,092	)		(1,046	)
State		(1,207	)		(624	)		277		(736	)		(249	)

		(6,244	)		(3,154	)		1,387		(3,828	)		(1,295	)

Provision for (benefit from) income taxes	$	(6,244	)	$	(3,154	)	$	26,444	$	30,935		$	13,298

F-18

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

Deferred income tax assets and liabilities consist of:


	As of January 31, 2004			As of April 30,
	As of January 31, 2004			2003			2002
Current deferred income tax assets
Accrued liabilities and deferred income	$	3,823		$	2,930		$	2,961
Provision for doubtful accounts		2,400			3,937			4,017

Current deferred income tax assets		6,223			6,867			6,978

Current deferred income tax liabilities
Prepaid expenses		1,350			726			319

Current deferred income tax liabilities		1,350			726			319

Current net deferred income tax asset	$	4,873		$	6,141		$	6,659

Non-current deferred income tax assets
Net operating loss carryforwards	$	20,676		$	8,745		$	8,685
Accrued liabilities and deferred income		3,815			4,114			1,647
Valuation allowance		(1,112	)		(1,112	)		(1,112	)

Non-current deferred income tax assets		23,379			11,747			9,220

Non-current deferred income tax liabilities
Depreciation and amortization		37,590			33,257			30,994
Other		1,411			1,624			491

Non-current deferred income tax liabilities		39,001			34,881			31,485

Non-current net deferred income tax liability	$	15,622		$	23,134		$	22,265

As of January 31, 2004, the Company had federal net operating loss carryforwards of approximately $49,326, which expire in 2018 through 2024. A portion of the federal net operating loss carryforwards is subject to annual usage limitations under Internal Revenue Code Section 382. The valuation allowance of $1,112 as of January 31, 2004 relates to deferred tax assets for state net operating loss carryforwards that may not be realized. The valuation allowance will be adjusted to goodwill when, and if, the Company determines that the deferred income tax assets are more likely than not to be realized.

The Company’s effective income tax rate differs from the U.S. statutory rate as follows:


	For the Nine Months Ended January 31,				For the Years Ended April 30,
	2004		2003		2003		2002		2001
			(Unaudited)
Federal statutory rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal tax benefits	5.0		4.1		4.1		4.3		6.0
Amortization of non-deductible goodwill	—		—		—		2.7		13.6
Other	(0.3	)	—		—		0.1		0.2

	39.7	%	39.1	%	39.1	%	42.1	%	54.8	%

F-19

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

12. COMMITMENTS AND CONTINGENCIES

Leases

The Company is committed to making rental payments under noncancelable operating leases covering various facilities and equipment. Rent expense totaled $6,154 and $5,115 for the nine months ended January 31, 2004 and 2003, respectively, and $7,444, $2,379 and $1,038 for the years ended April 30, 2003, 2002 and 2001, respectively and is included in operating expense on the consolidated statements of operations.

Future minimum lease payments required under noncancelable operating leases are as follows:


	Amount
Through April 30, 2004	$	2,187
2005		6,217
2006		3,943
2007		1,919
2008		957
2009		224
Thereafter		47

Total	$	15,494

Litigation

On August 27, 2002, a plaintiff group comprising 154 franchisees filed an action against the Company and Santa Barbara Bank & Trust in the Superior Court of New Jersey, Morris County. The suit alleged, among other things, that the Company breached an agreement with the plaintiffs by not paying them a portion of surpluses in refund anticipation loan loss reserves. The plaintiffs sought a declaratory judgment, an accounting, payment of an incentive rebate, unspecified compensatory and punitive damages, treble damages and attorneys’ fees. By an order dated December 6, 2002, the court dismissed the conversion and fraud counts of the complaint with prejudice. The plaintiffs filed an amended complaint on March 17, 2003. The parties submitted the matter to mediation in July 2003, which resulted in a settlement. Accordingly, a charge of $8,899 was included within selling, general and administrative expenses on the accompanying consolidated statement of operations for the nine months ended January 31, 2004.

The Company is involved in other pending litigation in the usual course of business. In the opinion of management, such other litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

F-20

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

13. STOCK-BASED COMPENSATION

Under its existing stock plans, Cendant may grant stock options, stock appreciation rights, restricted shares and restricted stock units (“RSUs”) to the Company’s employees. Prior to January 1, 2003, Cendant typically used stock options as a form of equity compensation. However, subsequent to December 31, 2002, Cendant changed the method by which it provides stock-based compensation to the Company’s employees and began issuing RSUs in place of stock options.

Stock Options

Employee stock options granted by Cendant generally have a ten-year term and vest ratably over periods ranging from two to five years. These employee stock options were granted with exercise prices at then-current fair market value. The activity of Cendant’s stock option plans related to the Company’s employees consisted of:


	For the Nine Months Ended January 31,
	2004				2003
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
					(Unaudited)
Beginning balance	1,968,348		$	15.21	2,107,144		$	15.10
Granted at fair market value	—			—	20,000			13.02
Exercised	(354,152	)		11.22	(66,582	)		10.00
Forfeited	(20,573	)		18.93	(12,742	)		15.03

Ending balance	1,593,623		$	16.05	2,047,820		$	15.25


	For the Years Ended April 30,
	2003				2002				2001
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Beginning balance	2,107,144		$	15.10	1,588,041		$	13.31	1,242,446		$	15.33
Granted at fair market value	20,000			13.02	712,180			18.50	752,930			10.02
Exercised	(78,980	)		9.96	(84,658	)		11.22	(259,636	)		15.32
Forfeited	(79,816	)		16.93	(108,419	)		14.23	(147,699	)		9.98

Ending balance	1,968,348		$	15.21	2,107,144		$	15.10	1,588,041		$	13.31

During 2002, Cendant’s Board of Directors accelerated the vesting of certain options previously granted with exercise prices greater than or equal to $15.1875. In connection with such action, 1,163,903 options (with a weighted average exercise price of $19.20), substantially all of which were scheduled to become exercisable by January 2004, became exercisable as of August 27, 2002. In addition, the post-employment exercise period for the modified options was reduced from one year to thirty days. However, if the employee remains employed by Cendant through the date on which the option was originally scheduled to become vested, the post-employment exercise period will be one

F-21

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

year. In accordance with the provisions of the FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation (an Interpretation of APB Opinion No. 25),” there was no charge associated with this modification since none of the modified options had intrinsic value because the market price of the underlying Cendant common stock on August 27, 2002 was less than the exercise price of the modified options.

The table below summarizes information regarding outstanding and exercisable stock options issued to the Company’s employees as of January 31, 2004:


	Outstanding Options				Exercisable Options
	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
$0.01 to $10.00	457,200	4.6	$	9.48	457,200	$	9.48
$10.01 to $20.00	856,934	6.0		17.63	822,930		17.82
$20.01 to $30.00	279,489	4.4		21.95	279,489		21.95

	1,593,623	5.3	$	16.05	1,559,619	$	16.12

The weighted-average grant-date fair value of Cendant common stock options granted during the years ended April 30, 2003, 2002 and 2001 was $5.98, $8.51 and $4.83, respectively. The fair values of these stock options are estimated on the dates of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted in 2003, 2002 and 2001:


	For the Years Ended April 30,
	2003		2002		2001
Dividend yield	—		—		—
Expected volatility	49.0	%	50.0	%	50.0	%
Risk-free interest rate	2.4	%	4.2	%	4.4	%
Expected holding period (years)	3.6		4.5		4.5

Restricted Stock Units

Each RSU granted by Cendant entitles the employee to receive one share of Cendant common stock upon vesting, which occurs ratably over a four-year period. As of January 31, 2004 and April 30, 2003, the number of outstanding RSUs granted to the Company’s employees was 141,434 and 140,471, respectively, with a weighted-average grant-date fair value of $13.73 and $13.64, respectively. The Company is allocated compensation expense for such RSUs on a basis consistent with the related vesting period. During the nine months ended January 31, 2004 and the year ended April 30, 2003, the Company recorded pre-tax compensation expense of $365 and $10, respectively, in connection with these RSUs, which is included within selling, general and administrative expenses on the Company’s consolidated statements of operations.

F-22

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

14. FINANCIAL INSTRUMENTS

Credit Risk and Exposure

Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts and notes receivable. The Company manages such risk by evaluating the financial position and creditworthiness of such counterparties. As of January 31, 2004, there were no significant concentrations of credit risk with any individual counterparty or groups of counterparties. Concentrations of credit risk associated with receivables are considered minimal due to the Company’s diverse customer base. Bad debts associated with trade receivables have not been significant. The Company does not normally require collateral or other security to support credit sales.

Fair Value

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. The fair value of notes receivable is determined based on the net present value of estimated payments to be received over the life of the note. The carrying amount and estimated fair value for notes receivable were $8,523 and $9,000, respectively, as of January 31, 2004; $3,379 and $3,899, respectively, as of April 30, 2003; and $2,189 and $2,765, respectively, as of April 30, 2002.

F-23

JACKSON HEWITT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unless otherwise noted, all dollar amounts are in thousands except per share amounts)

15. SEGMENT INFORMATION

Management evaluates the operating results of each of its reportable segments based upon revenue and income before income taxes.


	Franchise Operations		Company- Owned Office Operations			Corporate^(a)			Total
*Nine months ended January 31, 2004*
Total revenues	$	51,849		20,995		$	—		$	72,844

Expenses:
Operating		17,927		20,984			—			38,911
Marketing and advertising		15,074		3,260			—			18,334
Selling, general and administrative		3,265		2,324			17,071			22,660
Depreciation and amortization		5,709		3,232			—			8,941

Total expenses		41,975		29,800			17,071			88,846

Income (loss) from operations	$	9,874	$	(8,805	)	$	(17,071	)	$	(16,002	)

Income (loss) before income taxes	$	10,423	$	(8,805	)	$	(17,333	)	$	(15,715	)

Segment assets	$	536,810	$	61,619		$	60,228		$	658,657

Capital expenditures	$	1,311	$	2,463		$	—		$	3,774


*Nine months ended January 31, 2003*
Total revenues	$	42,434	$	16,580		$	—		$	59,014

Expenses:
Operating		13,745		18,320			—			32,065
Marketing and advertising		12,346		3,217			—			15,563
Selling, general and administrative		2,947		1,572			7,129			11,648
Depreciation and amortization		5,419		3,059			—			8,478

Total expenses		34,457		26,168			7,129			67,754

Income (loss) from operations	$	7,977	$	(9,588	)	$	(7,129	)	$	(8,740	)

Income (loss) before income taxes	$	8,648	$	(9,588	)	$	(7,129	)	$	(8,069	)

Capital expenditures	$	1,947	$	2,615		$	—		$	4,562


*Year ended April 30, 2003*
Total revenues	$	123,127	$	48,420		$	—		$	171,547

Expenses:
Operating		18,971		34,184			—			53,155
Marketing and advertising		20,631		4,455			—			25,086
Selling, general and administrative		3,365		2,435			9,197			14,997
Depreciation and amortization		7,274		4,249			—			11,523

Total expenses		50,241		45,323			9,197			104,761

Income (loss) from operations	$	72,886	$	3,097		$	(9,197	)	$	66,786

Income (loss) before income taxes	$	73,677	$	3,097		$	(9,197	)	$	67,577

Segment assets	$	491,252	$	70,844		$	99,805		$	661,901

Capital expenditures	$	2,514	$	2,714		$	—		$	5,228

F-24


	Franchise Operations		Company- Owned Office Operations		Corporate^(a)			Total

*Year ended April 30, 2002*
Total revenues	$	115,739	$	41,252	$	—		$	156,991

Expenses:
Operating		19,511		17,697		—			37,208
Marketing and advertising		16,353		2,483		—			18,836
Selling, general and administrative		4,362		937		12,583			17,882
Depreciation and amortization		11,626		1,198		—			12,824

Total expenses		51,852		22,315		12,583			86,750

Income (loss) from operations	$	63,887	$	18,937	$	(12,583	)	$	70,241

Income (loss) before income taxes	$	65,336	$	18,937	$	(10,815	)	$	73,458

Segment assets	$	495,265	$	73,553	$	48,981		$	617,799

Capital expenditures^(b)	$	21,754	$	912	$	—		$	22,666


*Year ended April 30, 2001*
Total revenues	$	75,505	$	—	$	—		$	75,505

Expenses:
Operating		12,861		—		—			12,861
Marketing and advertising		13,474		—		—			13,474
Selling, general and administrative		3,739		—		10,216			13,955
Depreciation and amortization		13,990		—		—			13,990

Total expenses		44,064		—		10,216			54,280

Income (loss) from operations	$	31,441	$	—	$	(10,216	)	$	21,225

Income (loss) before income taxes	$	33,283	$	—	$	(9,035	)	$	24,248

Capital expenditures^(b)	$	20,697	$	—	$	—		$	20,697

^(a)	Represents unallocated corporate overhead and common assets supporting both segments, including amounts due from Cendant.

^(b)	Includes investments in 2002 and 2001 of $16,494 and $20,338, respectively, for tax preparation software.

16. SUBSEQUENT EVENT

On February 20, 2004, Jackson Hewitt Tax Service Inc. was incorporated as a Delaware holding company. Cendant contributed all outstanding shares of the Company to Jackson Hewitt Tax Service Inc. on that date.

******

F-25

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

TABLE OF CONTENTS


		Page
Prospectus Summary		1
Risk Factors		8
Special Note Regarding Forward-Looking Statements		16
Use of Proceeds		17
Dividend Policy		17
Capitalization		18
Selected Consolidated Financial Data		19
Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Business		36
Management		51
Certain Relationships and Related Transactions		60
Principal and Selling Stockholder		68
Description of Capital Stock		69
Shares Eligible for Future Sale		76
Underwriting		78
Legal Counsel		81
Experts		81
Where You Can Find Additional Information		82
Index to Consolidated Financial Statements		F-1

Through and including , 2004 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Jackson Hewitt Tax Service Inc.

Common Stock

PROSPECTUS

Goldman, Sachs & Co.

JPMorgan

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs, other than underwriting discounts and commissions, payable in connection with the sale of the common stock being registered. All amounts, except the SEC registration fee, the NASD filing fee and the listing fee, are estimates.


Expenses	Amount
SEC registration fee	$	12,670
NASD filing fee		10,500
listing fee		*
Printing and engraving expenses		*
Legal fees and expenses		*
Transfer agent and registrar fees		*
Accounting fees and expenses		*
Blue Sky fees and expenses		*
Miscellaneous		*

Total	$	*

*	To be furnished by amendment.

Item 14. Indemnification of Officers and Directors.

Section 102 of the General Corporation Law of the State of Delaware allows a corporation to eliminate the personal liability of directors to a corporation or its stockholders for monetary damages for a breach of a fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase or redemption in violation of Delaware corporate law or obtained an improper personal benefit.

Section 145 of the Delaware General Corporation Law empowers a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation) by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. A Delaware corporation may indemnify directors, officers, employees and other agents of such corporation in an action by or in the right of a corporation under the same conditions against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense and settlement of such action or suit, except that no indemnification is permitted without judicial approval if the person to be indemnified has been adjudged to be liable to the corporation. Where a present or former director or officer of the corporation is successful on the merits or otherwise in the defense of any action, suit or proceeding referred to above or in defense of any claim, issue or matter therein, the corporation must indemnify such person against the expenses (including attorneys’ fees) which he or she actually and reasonably incurred in connection therewith.

II-1

Section 174 of the General Corporation Law of the State of Delaware provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered into the books containing the minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.

The Registrant’s By-Laws contain provisions that provide for indemnification of officers and directors and their heirs and distributees to the full extent permitted by, and in the manner permissible under, the General Corporation Law of the State of Delaware.

As permitted by Section 102(b)(7) of the General Corporation Law of the State of Delaware, the Registrant’s Certificate of Incorporation contains a provision eliminating the personal liability of a director to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director, subject to some exceptions.

The Registrant maintains, at its expense, a policy of insurance which insures its directors and officers, subject to exclusions and deductions as are usual in these kinds of insurance policies, against specified liabilities which may be incurred in those capacities.

In addition, the Registrant has agreed to indemnify Cendant and its officers, directors, employees and agents against civil liabilities, including liabilities under the Securities Act of 1933 relating to misstatements in or omissions from the registration statement of which this prospectus forms a part and any other registration statement that the Registrant files under the Securities Act, other than misstatements or omissions relating to information specifically about Cendant in the registration statement and furnished in writing by Cendant for use in the preparation of any such registration statement, against which Cendant has agreed to indemnify the Registrant.

Item 15. Recent Sales of Unregistered Securities.

On February 27, 2004, we issued 100 shares of common stock to Cendant Finance Holding Corporation in connection with the organization of the Registrant for aggregate consideration of $1.00. This transaction was exempt from registration under the Securities Act by virtue of the exemption provided by Section 4(2) of the Securities Act for transactions not involving a public offering.

Concurrently with the closing of this offering, we intend to issue $175 million aggregate principal amount of fixed and/or floating rate notes to a limited number of institutional investors. The notes placement will be exempt from registration under the Securities Act by virtue of the exemption provided under Section 4(2) of the Securities Act for transactions not involving a public offering.

Following the closing of the offering, we will issue to officers and various employees of the Registrant and its subsidiaries shares of common stock and options to purchase an aggregate of shares of our common stock in exchange for restricted stock units and stock options of Cendant Corporation held by them. The issuance of such stock options and common stock will be exempt from the registration requirements of the Securities Act pursuant to Rule 701 promulgated thereunder.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

II-2


Exhibit No.		Description

1.1		Form of Underwriting Agreement.*

3.1		Amended and Restated Certificate of Incorporation.*

3.2		By-laws.*

4.1		Form of common stock certificate.

5.1		Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP.*

10.1		Employment Agreement between Jackson Hewitt Tax Service Inc. and Michael D. Lister, dated , 2004.*

10.2		Employment Agreement between Jackson Hewitt Tax Service Inc. and Mark L. Heimbouch, dated , 2004.*

10.3		Transitional Services Agreement between Jackson Hewitt Tax Service Inc. and Cendant Corporation, dated , 2004.*

10.4		Refund Anticipation Loan Program Agreement between Jackson Hewitt Inc. and Santa Barbara Bank & Trust, dated , 2004.*

10.5		Amended and Restated Program Agreement between Jackson Hewitt Inc., Household Tax Masters Inc. and Beneficial Franchise Company Inc., dated as of January 1, 2003.**

10.6		Credit Agreement by and among Jackson Hewitt Tax Service Inc. and the Lenders named therein, dated , 2004.*

10.7		Leasing Operations Supplier Agreement (Products and/or Services) between Jackson Hewitt Inc. and Wal-Mart Stores, Inc., dated April 8, 2004.

10.8		Form of Franchise Agreement.

10.9		2004 Equity and Incentive Plan.*

10.10		Employee Stock Purchase Plan.*

10.11		Form of Settlement Agreement between Jackson Hewitt Inc. and the Settling Plaintiff.

10.12		Form of Settlement Agreement between Jackson Hewitt Inc. and the Settling Franchisee.

10.13		Parsippany Sublease Agreement between Jackson Hewitt Tax Service Inc. and Cendant Corporation, dated , 2004.*

10.14		Form of Purchase Agreement relating to Series A Fixed Rate Notes.*

10.15		Form of Purchase Agreement relating to Series B Floating Rate Notes.*

11.1		Computation of per share earnings.*

14.1		Code of ethics.*

21.1		Subsidiaries of the Registrant.

23.1		Consent of Deloitte & Touche LLP, Independent Accountants.

23.2		Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).*

24.1		Power of Attorney (included on signature page).***

*	To be filed by amendment.

**	Portions of Exhibit 10.5 have been omitted pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended.

***	Previously filed.

II-3

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising out of the Securities Act of 1933 (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 in 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.

The undersigned 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 a 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.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Parsippany, State of New Jersey, on April 20, 2004.


JACKSON HEWITT TAX SERVICE INC.

By:		/s/ MICHAEL D. LISTER
		Name: Michael D. Lister Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ MICHAEL D. LISTER Michael D. Lister	Chairman, President and Chief Executive Officer (Principal executive officer)	April 20, 2004

/s/ * Mark L. Heimbouch	Chief Financial Officer and Director (Principal financial officer and principal accounting officer)	April 20, 2004

/s/ * Samuel L. Katz	Director	April 20, 2004

/s/ * Thomas D. Christopoul	Director	April 20, 2004



*By:		/s/ MICHAEL D. LISTER
		Michael D. Lister Attorney-in-fact

II-5

EXHIBIT INDEX


Exhibit No.		Description

1.1		Form of Underwriting Agreement.*

3.1		Amended and Restated Certificate of Incorporation.*

3.2		By-laws.*

4.1		Form of common stock certificate.

5.1		Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP.*

10.1		Employment Agreement between Jackson Hewitt Tax Service Inc. and Michael D. Lister, dated , 2004.*

10.2		Employment Agreement between Jackson Hewitt Tax Service Inc. and Mark L. Heimbouch, dated , 2004.*

10.3		Transitional Services Agreement between Jackson Hewitt Tax Service Inc. and Cendant Corporation, dated , 2004.*

10.4		Refund Anticipation Loan Program Agreement between Jackson Hewitt Inc. and Santa Barbara Bank & Trust, dated , 2004.*

10.5		Amended and Restated Program Agreement between Jackson Hewitt Inc., Household Tax Masters Inc. and Beneficial Franchise Company Inc., dated as of January 1, 2003.**

10.6		Credit Agreement by and among Jackson Hewitt Tax Service Inc. and the Lenders named therein, dated , 2004.*

10.7		Leasing Operations Supplier Agreement (Products and/or Services) between Jackson Hewitt Inc. and Wal-Mart Stores, Inc., dated April 8, 2004.

10.8		Form of Franchise Agreement.

10.9		2004 Equity and Incentive Plan.*

10.10		Employee Stock Purchase Plan.*

10.11		Form of Settlement Agreement between Jackson Hewitt Inc. and the Settling Plaintiff.

10.12		Form of Settlement Agreement between Jackson Hewitt Inc. and the Settling Franchisee.

10.13		Parsippany Sublease Agreement between Jackson Hewitt Tax Service Inc. and Cendant Corporation, dated , 2004.*

10.14		Form of Note Purchase Agreement relating to Series A Fixed Rate Notes.*

10.15		Form of Note Purchase Agreement relating to Series B Floating Rate Notes.*

11.1		Computation of per share earnings.*

14.1		Code of ethics.*

21.1		Subsidiaries of the Registrant.

23.1		Consent of Deloitte & Touche LLP, Independent Accountants.

23.2		Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).*

24.1		Power of Attorney.***

*	To be filed by amendment.

**	Portions of Exhibit 10.5 have been omitted pursuant to a request for confidential treatment under Rule 406 under the Securities Act of 1933, as amended.

***	Previously filed.