10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 25, 2008

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 333-122531

THE MONEY TREE INC.

(Exact name of registrant as specified in its charter)

Georgia	58-2171386
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

114 South Broad Street

Bainbridge, Georgia 39817

(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code (229) 246-6536

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  x  (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    ¨  Yes    x  No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the last practicable date.

Class	Outstanding at March 25, 2008
Class A, Voting	2,686 Shares
Class B, Non-Voting	26,860 Shares

THE MONEY TREE INC.

FORM 10-Q

March 25, 2008

TABLE OF CONTENTS

Index to Financial Statements

Item No.		Page
	PART I – FINANCIAL INFORMATION
1	Financial Statements	2
	Consolidated Balance Sheets as of March 25, 2008 (Unaudited) and September 25, 2007	2
	Consolidated Statements of Operations for the three and six months ended March 25, 2008 and 2007 (Unaudited)	3
	Consolidated Statements of Cash Flows for the six months ended March 25, 2008 and 2007 (Unaudited)	4
	Notes to Consolidated Financial Statements (Unaudited)	6
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
3	Quantitative and Qualitative Disclosures About Market Risk	28
4	Controls and Procedures	28
	PART II – OTHER INFORMATION
1	Legal Proceedings	30
1A	Risk Factors	30
2	Unregistered Sales of Equity Securities and Use of Proceeds	30
3	Defaults Upon Senior Securities	30
4	Submission of Matters to a Vote of Security Holders	30
5	Other Information	30
6	Exhibits	30

1

The Money Tree Inc. and Subsidiaries

Consolidated Balance Sheets

	March 25, 2008			September 25, 2007
	(Unaudited)
Assets
Cash and cash equivalents	$	17,734,805		$	17,854,277
Finance receivables, net		76,060,824			75,837,823
Other receivables		856,506			863,356
Inventory		2,669,511			3,056,775
Property and equipment, net		4,126,623			4,219,885
Deferred income taxes		1,163,000			1,210,000
Goodwill		991,243			991,243
Other assets		1,876,218			1,750,142
Total assets	$	105,478,730		$	105,783,501
Liabilities and Shareholders’ Deficit
Liabilities
Accounts payable and other accrued liabilities	$	3,934,085		$	4,020,056
Accrued interest payable		15,215,325			14,329,092
Senior debt		441,848			511,663
Variable rate subordinated debentures		82,602,464			81,861,016
Demand notes		4,218,249			5,991,374
Total liabilities		106,411,971			106,713,201
Shareholders’ Deficit
Common stock:
Class A voting, no par value; 500,000 shares authorized, 2,686 shares issued and outstanding		1,677,647			1,677,647
Class B non-voting, no par value; 1,500,000 shares authorized, 26,860 shares issued and outstanding		—			—
Accumulated deficit		(2,610,888	)		(2,607,347	)
Total shareholders’ deficit		(933,241	)		(929,700	)
Total liabilities and shareholders’ deficit	$	105,478,730		$	105,783,501

See accompanying notes to the consolidated financial statements.

2

The Money Tree Inc. and Subsidiaries

Consolidated Statements of Operations

	Three months ended March 25,						Six months ended March 25,
	2008			2007			2008			2007
	(Unaudited)						(Unaudited)
Interest and fee income	$	4,849,163		$	4,751,280		$	9,837,355		$	9,885,885
Interest expense		(2,046,379	)		(1,945,927	)		(4,111,892	)		(3,886,996	)
Net interest and fee income before provision for credit losses		2,802,784			2,805,353			5,725,463			5,998,889
Provision for credit losses		(927,625	)		(955,897	)		(2,470,298	)		(2,082,599	)
Net interest and fee income after provision for credit losses		1,875,159			1,849,456			3,255,165			3,916,290
Insurance commissions		2,387,463			2,588,617			4,950,478			5,285,040
Commissions from motor club memberships from company owned by related parties		396,834			394,494			909,150			939,481
Delinquency fees		485,203			502,992			897,017			909,291
Income tax service agreement income from company owned by related parties		—			3,310			—			3,310
Other income		159,396			185,501			311,259			371,782
Net revenue before retail sales		5,304,055			5,524,370			10,323,069			11,425,194
Retail sales		4,506,583			4,626,927			9,541,498			9,712,194
Cost of sales		(2,894,464	)		(3,025,232	)		(5,972,756	)		(6,220,811	)
Gross margin on retail sales		1,612,119			1,601,695			3,568,742			3,491,383
Net revenues		6,916,174			7,126,065			13,891,811			14,916,577
Operating expenses
Personnel expense		(4,086,671	)		(3,982,576	)		(7,968,141	)		(7,841,854	)
Facilities expense		(911,463	)		(918,766	)		(1,905,896	)		(1,878,031	)
General and administrative expenses		(791,840	)		(766,846	)		(1,561,328	)		(1,533,725	)
Other operating expenses		(1,259,135	)		(1,432,646	)		(2,444,988	)		(2,712,894	)
Total operating expenses		(7,049,109	)		(7,100,834	)		(13,880,353	)		(13,966,504	)
Net operating income (loss)		(132,935	)		25,231			11,458			950,073
Loss on sale of property and equipment		(3,455	)		(12,188	)		(18,092	)		(21,826	)
Income (loss) before income tax expense		(136,390	)		13,043			(6,634	)		928,247
Income tax (expense) benefit		62,336			264,062			3,093			(266,471	)
Net income (loss)	$	(74,054	)	$	277,105		$	(3,541	)	$	661,776
Net income (loss) per common share, basic and diluted	$	(2.51	)	$	9.38		$	(0.12	)	$	22.40

See accompanying notes to the consolidated financial statements.

3

The Money Tree Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Six months ended March 25,	2008			2007
	(Unaudited)
Cash flows from operating activities
Net income (loss)	$	(3,541	)	$	661,776
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for credit losses		2,470,298			2,082,599
Depreciation		384,984			408,246
Amortization		2,857			2,857
Deferred income taxes		47,000			—
Loss on sale of property and equipment		18,092			21,826
Change in assets and liabilities
Other receivables		6,850			49,490
Inventory		387,264			83,256
Other assets		(128,933	)		490,440
Accounts payable and other accrued liabilities		(85,971	)		228,479
Accrued interest payable		886,233			1,297,050
Net cash provided by operating activities		3,985,133			5,326,019
Cash flows from investing activities
Finance receivables originated		(38,356,420	)		(38,096,586	)
Finance receivables repaid		35,663,121			37,544,442
Purchase of property and equipment		(348,362	)		(758,382	)
Proceeds from sale of property and equipment		38,548			519,282
Net cash used in investing activities		(3,003,113	)		(791,244	)
Cash flows from financing activities
Net proceeds (repayments) on:
Senior debt		(69,815	)		(69,975	)
Demand notes		(1,773,125	)		(1,571,835	)
Repayments on senior subordinated debt		—			(300,000	)
Repayments on junior subordinated debt and related parties		—			(210,000	)
Proceeds-variable rate subordinated debentures		7,590,167			6,760,879
Payments-variable rate subordinated debentures		(6,848,719	)		(5,346,235	)
Net cash used in financing activities		(1,101,492	)		(737,166	)
Net change in cash and cash equivalents		(119,472	)		3,797,609
Cash and cash equivalents, beginning of period		17,854,277			12,919,524
Cash and cash equivalents, end of period	$	17,734,805		$	16,717,133

See accompanying notes to the consolidated financial statements.

4

The Money Tree Inc. and Subsidiaries

Consolidated Statements of Cash Flows (continued)

Six months ended March 25,	2008		2007
	(Unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	3,155,881	$	2,491,294
Income taxes	$	228,839	$	6,949

See accompanying notes to the consolidated financial statements.

5

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements of The Money Tree Inc., a Georgia corporation (the “Parent”) and subsidiaries (collectively with the Parent, the “Company”) included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, see Note 1 to the Consolidated Financial Statements in the Company’s 2007 Annual Report on Form 10-K.

The consolidated financial statements include the accounts of the Company and all of its subsidiaries after eliminating all significant intercompany transactions and reflect all normal, recurring adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations of the Company in conformity with U.S. generally accepted accounting principles for the interim periods reported. The results of operations for the three and six months ended March 25, 2008 and 2007 are not necessarily indicative of the results for the full fiscal year.

NOTE 2 – NATURE OF BUSINESS

The Company’s business consists of: the operation of finance company offices in 102 locations throughout Georgia, Alabama, Louisiana and Florida; sales of retail merchandise (principally furniture, appliances, and electronics) at certain finance company locations; and the operation of three used automobile dealerships in the state of Georgia. The Company also earns revenues from commissions on premiums written for certain insurance products, when requested by loan customers, as an agent for a non-affiliated insurance company. Revenues are also generated from commissions on the sales of prepaid phone service and automobile club memberships.

The Company’s loan portfolio consists of sales finance loan receivables and direct consumer loan receivables. Sales finance loan receivables consist principally of retail installment sale contracts collateralized by used automobiles and consumer goods which are initiated by automobile and consumer good dealerships, subject to credit approval, in the locations where the Company operates offices. Direct loan receivables are loans originated directly to customers.

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return. If there are changes in net assets as a result of application of FIN 48 these will be accounted for as an adjustment to retained earnings. Additional disclosures about the amounts of such liabilities will be required also. The Company adopted FIN 48 on September 26, 2007 and its adoption did not have a material effect on the Company’s consolidated financial statements.

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact the adoption of this statement could have on the Company’s consolidated financial statements.

6

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Liabilities—Including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure certain financial assets and liabilities at fair value (the “fair value option”). Unrealized gains and losses, arising subsequent to adoption, are reported in earnings. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact the adoption of this statement could have on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS 141(R), Business Combinations. This Statement replaces SFAS 141, “Business Combinations.” This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) will apply prospectively to business combinations for which the acquisition date is on or after the Company’s fiscal year beginning September 26, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 25, 2009.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements. This Statement amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The Company has not yet determined the impact, if any, that SFAS 160 will have on its consolidated financial statements. SFAS 160 is effective for the Company’s fiscal year beginning September 26, 2009.

FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. Management does not expect SFAS No. 161 to have a material impact on the Company’s consolidated financial statements.

7

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 4 – FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

Finance receivables consisted of the following:

	March 25, 2008			September 25, 2007
	(Unaudited)
Finance receivables, direct consumer	$	44,412,671		$	46,834,666
Finance receivables, consumer sales finance		16,813,744			14,466,682
Finance receivables, auto sales finance		32,220,882			32,259,968
Total gross finance receivables		93,447,297			93,561,316
Unearned insurance commissions		(2,707,526	)		(2,815,646	)
Unearned finance charges		(11,967,035	)		(12,122,154	)
Accrued interest receivable		1,010,748			924,986
Finance receivables, before allowance for credit losses		79,783,484			79,548,502
Allowance for credit losses		(3,722,660	)		(3,710,679	)
Finance receivables, net	$	76,060,824		$	75,837,823

An analysis of the allowance for credit losses is as follows:

	As of and for the six months ended March 25, 2008			As of and for the year ended September 25, 2007			As of and for the six months ended March 25, 2007
	(Unaudited)						(Unaudited)
Beginning balance	$	3,710,679		$	3,139,359		$	3,139,359
Provisions for credit losses		2,470,298			4,982,494			2,082,599
Charge-offs		(2,573,374	)		(4,583,650	)		(2,308,429	)
Recoveries		91,835			181,218			94,414
Other		23,222			(8,742	)		(17,140	)
Ending balance	$	3,722,660		$	3,710,679		$	2,990,803

NOTE 5 – INVENTORY

Inventory consisted of the following:

	March 25, 2008		September 25, 2007
	(Unaudited)
Used automobiles	$	1,913,691	$	2,170,617
Home furnishings and electronics		755,820		886,158
Total inventory	$	2,669,511	$	3,056,775

8

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 6 – ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

Accounts payable and other accrued liabilities consisted of the following:

	March 25, 2008		September 25, 2007
	(Unaudited)
Accounts payable	$	227,248	$	272,558
Insurance payable, loan related		653,481		698,719
Accrued payroll		534,088		521,063
Accrued payroll taxes		47,619		39,402
Money orders		1,031,809		987,264
Sales tax payable		1,288,776		1,314,176
Other liabilities		151,064		186,874
Total accounts payable and other accrued liabilities	$	3,934,085	$	4,020,056

NOTE 7 – DEBT

Debt consisted of the following:

	March 25, 2008		September 25, 2007
	(Unaudited)
Senior debt: due to banks and commercial finance companies, collateralized by inventory and certain automotive equipment, and certain notes include personal guarantees of a shareholder, interest at 4.49% to 8.25% (some variable), due 2008 to 2009. The carrying values of the collateral at March 25, 2008 and September 25, 2007 were $469,505 and $1,053,418, respectively.	$	441,848	$	511,663
Total senior debt		441,848		511,663
Variable rate subordinated debentures issued by The Money Tree of Georgia Inc.: due to individuals, unsecured, interest at 4.25% to 9.6%, due at various dates through 2011.		51,217,700		56,267,926
Variable rate subordinated debentures issued by The Money Tree Inc.: due to individuals, unsecured, interest at 6.0% to 8.7%, due at various dates through 2011.		31,384,764		25,593,090
Total variable rate subordinated debentures		82,602,464		81,861,016

9

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 – DEBT (Continued)

	March 25, 2008		September 25, 2007
	(Unaudited)
Demand notes issued by The Money Tree of Georgia Inc.: due to individuals, unsecured, interest at 4.25% to 5.0%, due on demand.	$	739,390	$	1,451,550
Demand notes issued by The Money Tree Inc.: due to individuals, unsecured, interest at 4.25% to 5.0%, due on demand.		3,478,859		4,539,824
Total demand notes		4,218,249		5,991,374
Total debt	$	87,262,561	$	88,364,053

NOTE 8 – INCOME TAXES

At the end of each quarter, the Company makes its best estimate of the effective tax rate expected to be applicable for the full fiscal year and uses that rate in providing for income taxes on a current year-to-date basis.

NOTE 9—RELATED PARTY TRANSACTIONS

Martin Family Group, LLLP owns the real estate of thirteen branch offices, one used car lot, and the Company’s principal executive offices. The estate of the Company’s founder and former CEO is a limited partner of Martin Family Group, LLLP. A shareholder of the Company is the president of Martin Investments, Inc., which is the managing general partner of Martin Family Group, LLLP. The Company has entered into lease agreements whereby rent is paid monthly for use of these locations. In addition, Martin Sublease, L.L.C., which is controlled by Martin Investments, Inc., leases, and then subleases to the Company, another 53 branch office locations and two used car lots for amounts greater than are paid in the underlying leases. This spread is generally to cover property operating cost or improvements made directly by these entities. In the opinion of management, rates paid for these are comparable to those obtained from third parties. Total rents paid were $1,043,646 and $1,014,854 for the six months and $523,821 and $508,194 for the three months ended March 25, 2008 and 2007, respectively and are included in operating expense in the accompanying unaudited Consolidated Statements of Operations.

The Company receives commissions from sales of motor club memberships from an entity, owned by the Company’s President and the late founder’s three children (of which one is a Director), pursuant to an Agency Sales Agreement. Commissions earned on the sale of these memberships were $909,150 and $939,481 for the six months and $396,834 and $394,494 for the three months ended March 25, 2008 and 2007, respectively.

The Company also engages from time to time in other transactions with related parties. Refer to the “Related Party Transactions” disclosure in the notes to the Company’s Consolidated Financial Statements as of and for the year ended September 25, 2007.

10

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 10 – CONTINGENT LIABILITIES

The Company is a party to litigation arising in the normal course of business. With respect to all such lawsuits, claims, and proceedings, the Company establishes reserves when it is probable a liability has been incurred and the amount can reasonably be estimated. In the opinion of management, the resolution of such matters will not have a material effect on the financial position or results of operations of the Company.

NOTE 11 – DISCRETIONARY BONUSES

From time to time, the Company pays discretionary bonuses to its employees. The amount of these bonuses charged to operating expenses was $1,201,774 and $1,130,995 for the six months and $623,119 and $600,197 for the three months ended March 25, 2008 and 2007, respectively.

NOTE 12 – SEGMENT FINANCIAL INFORMATION

Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information (SFAS 131), requires companies to determine segments based on how management makes decisions about allocating resources to segments and measuring their performance.

The Company has two reportable segments: Consumer Finance and Sales and Automotive Finance and Sales.

Consumer finance and sales segment

This segment is comprised of original core operations of the Company: the small consumer loan business in the four states in which the Company operates. The 102 offices that make up this segment are similar in size and in the markets they serve. All, with few exceptions, offer consumer goods for sale acting as an agent for another subsidiary of the Company, Home Furniture Mart Inc., which is aggregated in this segment since its sales are generated through these finance offices. This segment is structured with branch management reporting through a regional management level to an operational manager and ultimately to the chief operating decision maker.

Automotive finance and sales segment

This segment is comprised of three used automobile sales locations and offers financing in conjunction with these sales. These locations target similar customers in the Bainbridge, GA, Columbus, GA and Dublin, GA markets and surrounding areas who generally cannot qualify for traditional financing. The sales and the financing organizations are aggregated in the segment. A general manager is responsible for sales and finance administration at each of the locations and reports to an operational manager and ultimately to the chief operating decision maker.

Accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K. Performance is measured by various factors such as segment profit, loan volumes and delinquency and loss management. All corporate expenses are allocated to the segments. Provision for income taxes are not allocated to segments.

11

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 – SEGMENT FINANCIAL INFORMATION (CONTINUED)

Six months ended March 25, 2008	Consumer Finance & Sales Division			Automotive Finance & Sales Division			Total Segments
In Thousands	(Unaudited)
Net revenues before retail sales	$	10,002		$	321		$	10,323
Gross margin on retail sales		1,860			1,709			3,569
Segment operating expenses		(11,945	)		(1,936	)		(13,881	)
Segment operating profit (loss)	$	(83	)	$	94		$	11
March 25, 2008
In Thousands
Assets
Total segment assets	$	61,511		$	27,919		$	89,430
RECONCILIATION:							March 25, 2008
							(Thousands)
Assets:
Total assets for reportable segments							$	89,430
Cash and cash equivalents at corporate level								10,875
Other receivables at corporate level								856
Property and equipment, net at corporate level								1,279
Deferred income taxes at corporate level								1,163
Other assets at corporate level								1,876
Consolidated Assets							$	105,479

12

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 – SEGMENT FINANCIAL INFORMATION (CONTINUED)

Six months ended March 25, 2007	Consumer Finance & Sales Division			Automotive Finance & Sales Division			Total Segments
In Thousands	(Unaudited)
Net revenues before retail sales	$	11,197		$	228		$	11,425
Gross margin on retail sales		1,529			1,962			3,491
Segment operating expenses		(11,971	)		(1,995	)		(13,966	)
Segment operating profit	$	755		$	195		$	950
March 25, 2007
In Thousands
Assets
Total segment assets	$	63,672		$	27,299		$	90,971
RECONCILIATION:							March 25, 2007
							(Thousands)
Assets:
Total assets for reportable segments							$	90,971
Cash and cash equivalents at corporate level								7,499
Other receivables at corporate level								965
Property and equipment, net at corporate level								1,277
Deferred income taxes at corporate level								645
Other assets at corporate level								1,580
Consolidated Assets							$	102,937

13

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 – SEGMENT FINANCIAL INFORMATION (CONTINUED)

Three months ended March 25, 2008	Consumer Finance & Sales Division			Automotive Finance & Sales Division			Total Segments
In Thousands	(Unaudited)
Net revenues before retail sales	$	5,176		$	128		$	5,304
Gross margin on retail sales		673			939			1,612
Segment operating expenses		(6,041	)		(1,008	)		(7,049	)
Segment operating profit (loss)	$	(192	)	$	59		$	(133	)
March 25, 2008
In Thousands
Assets
Total segment assets	$	61,511		$	27,919		$	89,430
RECONCILIATION:							March 25, 2008
							(Thousands)
Assets:
Total assets for reportable segments							$	89,430
Cash and cash equivalents at corporate level								10,875
Other receivables at corporate level								856
Property and equipment, net at corporate level								1,279
Deferred income taxes at corporate level								1,163
Other assets at corporate level								1,876
Consolidated Assets							$	105,479

14

The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 – SEGMENT FINANCIAL INFORMATION (CONTINUED)

Three months ended March 25, 2007	Consumer Finance & Sales Division			Automotive Finance & Sales Division			Total Segments
In Thousands	(Unaudited)
Net revenues before retail sales	$	5,516		$	8		$	5,524
Gross margin on retail sales		590			1,012			1,602
Segment operating expenses		(6,078	)		(1,023	)		(7,101	)
Segment operating profit (loss)	$	28		$	(3	)	$	25
March 25, 2007
In Thousands
Assets
Total segment assets	$	63,672		$	27,299		$	90,971
RECONCILIATION:							March 25, 2007
							(Thousands)
Assets:
Total assets for reportable segments							$	90,971
Cash and cash equivalents at corporate level								7,499
Other receivables at corporate level								965
Property and equipment, net at corporate level								1,277
Deferred income taxes at corporate level								645
Other assets at corporate level								1,580
Consolidated Assets							$	102,937

15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

The discussion set forth below, as well as other portions of this quarterly report, contains forward-looking statements within the meaning of federal securities law. Words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “predict,” or other similar words, identify forward-looking statements. Forward-looking statements include statements regarding our management’s intent, belief or current expectation about, among other things, trends affecting the markets in which we operate, our business, our financial condition and our growth strategies. Although we believe that the expectation reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those predicted in the forward-looking statements as a result of various factors, including, but not limited to, those risk factors set forth in our post-effective amendment to registration statement on Form S-1 filed with the Securities and Exchange Commission on January 23, 2008. Other factors not identified herein could also have such an effect. If any of these risk factors occur, they could have an adverse effect on our business, financial condition and results of operations. When considering forward-looking statements keep these risks in mind. These forward-looking statements are made as of the date of this filing. You should not place undo reliance on any forward-looking statement. We are not obligated to update forward-looking statements and will not update any forward-looking statements in this quarterly report to reflect future events or developments.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our consolidated financial statements, Selected Consolidated Financial Data and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our annual report on Form 10-K for the year ended September 25, 2007.

Overview

We make consumer finance loans and provide other financial products and services through our branch offices in Georgia, Alabama, Louisiana and Florida. We sell retail merchandise, principally furniture, appliances and electronics, at certain of our branch office locations and operate three used automobile dealerships in the State of Georgia. We also offer insurance products, prepaid phone services and automobile club memberships to our loan customers.

We fund our consumer loan demand through a combination of cash collections from our consumer loans, proceeds raised from the sale of debentures and demand notes and loans from various banks and other financial institutions. Our consumer loan business consists of making, purchasing and servicing direct consumer loans, consumer sales finance contracts and motor vehicle installment sales contracts. Direct consumer loans generally serve individuals with limited access to other sources of consumer credit, such as banks, savings and loans, other consumer finance businesses and credit cards. Direct consumer loans are general loans made typically to people who need money for some unusual or unforeseen expense, for the purpose of paying off an accumulation of small debts or for the purchase of furniture and appliances. The following table sets forth certain information about the components of our finance receivables for the periods presented:

16

Description of Loans and Contracts

	As of, or for, the Three Months Ended March 25,						As of, or for, the Six Months Ended March 25,
	2008			2007			2008			2007
Direct Consumer Loans:
Number of Loans Made to New Borrowers		3,299			3,536			8,797			9,607
Number of Loans Made to Former Borrowers		12,065			12,105			27,227			26,386
Number of Loans Made to Existing Borrowers		27,048			24,894			57,076			52,714
Total Number of Loans Made		42,412			40,535			93,100			88,707
Total Volume of Loans Made	$	14,434,528		$	15,328,449		$	34,375,610		$	36,079,206
Average Size of Loans Made	$	340		$	378		$	369		$	407
Number of Loans Outstanding		78,607			71,562			78,607			71,562
Total of Loans Outstanding*	$	37,901,014		$	41,419,988		$	37,901,014		$	41,419,988
Percent of Loans Outstanding		43.60	%		47.86	%		43.60	%		47.86	%
Average Balance on Outstanding Loans	$	482		$	579		$	482		$	579
Motor Vehicle Installment Sales Contracts:
Total Number of Contracts Made		235			266			425			500
Total Volume of Contracts Made	$	4,381,912		$	4,862,360		$	7,878,166		$	9,114,113
Average Size of Contracts Made	$	18,646		$	18,280		$	18,537		$	18,228
Number of Contracts Outstanding		2,819			2,752			2,819			2,752
Total of Contracts Outstanding*	$	32,220,882		$	31,842,737		$	32,220,882		$	31,842,737
Percent of Total Loans and Contracts		37.06	%		36.79	%		37.06	%		36.79	%
Average Balance on Outstanding Contracts	$	11,430		$	11,571		$	11,430		$	11,571
Consumer Sales Finance Contracts:
Number of Contracts Made to New Customers		41			26			79			67
Number of Loans Made to Former Customers		566			563			1,574			1,415
Number of Loans Made to Existing Customers		648			657			1,745			1,636
Total Contracts Made		1,255			1,246			3,398			3,118
Total Volume of Contracts Made	$	3,866,491		$	3,318,790		$	10,287,704		$	8,444,467
Number of Contracts Outstanding		7,180			6,693			7,180			6,693
Total of Contracts Outstanding*	$	16,813,744		$	13,284,095		$	16,813,744		$	13,284,095
Percent of Total Loans and Contracts		19.34	%		15.35	%		19.34	%		15.35	%
Average Balance of Outstanding Contracts	$	2,342		$	1,985		$	2,342		$	1,985

* Contracts outstanding are exclusive of the following aggregate amounts of bankrupt accounts: $6,511,657 as of March 25, 2008 and $5,851,373 as of March 25, 2007.

17

Below is a table showing our total gross outstanding finance receivables and bankrupt accounts:

	As of March 25,
	2008		2007
Total Finance Receivables Outstanding (gross):
Direct Consumer Loans	$	37,901,014	$	41,419,988
Motor Vehicle Installment		32,220,882		31,842,737
Consumer Sales Finance		16,813,744		13,284,095
Bankrupt Accounts		6,511,657		5,851,373
Total Gross Outstanding	$	93,447,297	$	92,398,193

Below is a roll-forward of the balance of each category of our outstanding finance receivables. Loans originated reflect the gross amount of loans made or purchased during the period presented inclusive of pre-computed interest, fees and insurance premiums. Collections represent cash receipts in the form of repayments made on our loans as reflected in our Consolidated Statements of Cash Flows. Refinancings represent the amount of the pay off of loans refinanced. Charge offs represent the gross amount of loans charged off as uncollectible (charge offs are shown net of non-file insurance receipts in our Allowance for Credit Losses). Rebates represent reductions to gross loan amounts of precomputed interest and insurance premiums resulting from loans refinanced and other loans paid off before maturity. Other adjustments primarily represent accounts transferred to and from the department that administers bankrupt accounts.

18

	For the Three Months Ended March 25,						For the Six Months Ended March 25,
	2008			2007			2008			2007
Direct Consumer Loans:
Balance - beginning	$	41,477,349		$	46,005,060		$	40,719,291		$	46,071,669
Finance receivables originated		14,434,528			15,328,449			34,375,610			36,079,206
Collections		(13,141,047	)		(14,301,982	)		(25,286,328	)		(27,466,213	)
Refinances		(3,263,506	)		(3,796,298	)		(7,903,072	)		(9,076,541	)
Charge offs, gross		(859,943	)		(910,202	)		(2,253,612	)		(1,926,506	)
Rebates / other adjustments		(746,367	)		(905,039	)		(1,750,875	)		(2,261,627	)
Balance - end	$	37,901,014		$	41,419,988		$	37,901,014		$	41,419,988
Consumer Sales Finance Contracts:
Balance - beginning	$	16,543,773		$	13,069,814		$	14,466,682		$	11,813,566
Finance receivables originated		3,866,491			3,318,790			10,287,703			8,444,467
Collections		(1,898,264	)		(1,548,679	)		(3,517,767	)		(2,887,849	)
Refinances		(1,041,020	)		(898,896	)		(2,824,155	)		(2,404,568	)
Charge offs, gross		(248,883	)		(309,127	)		(487,841	)		(764,799	)
Rebates / other adjustments		(408,353	)		(347,807	)		(1,110,878	)		(916,722	)
Balance - end	$	16,813,744		$	13,284,095		$	16,813,744		$	13,284,095
Motor Vehicle Installment Sales Contracts:
Balance - beginning	$	31,895,347		$	31,568,578		$	32,259,968		$	31,280,840
Finance receivables originated		4,381,912			4,862,360			7,878,167			9,114,113
Collections		(3,519,681	)		(3,795,836	)		(6,859,026	)		(7,190,380	)
Refinances		—			—			—			—
Charge offs, gross		(310,416	)		(344,529	)		(615,100	)		(631,539	)
Rebates / other adjustments		(226,280	)		(447,836	)		(443,127	)		(730,297	)
Balance - end	$	32,220,882		$	31,842,737		$	32,220,882		$	31,842,737
Total Active Accounts:
Balance - beginning	$	89,916,469		$	90,643,452		$	87,445,941		$	89,166,075
Loans originated		22,682,931			23,509,599			52,541,480			53,637,786
Collections		(18,558,992	)		(19,646,497	)		(35,663,121	)		(37,544,442	)
Refinances		(4,304,526	)		(4,695,194	)		(10,727,227	)		(11,481,109	)
Charge offs, gross		(1,419,242	)		(1,563,858	)		(3,356,553	)		(3,322,844	)
Rebates / other adjustments		(1,381,000	)		(1,700,682	)		(3,304,880	)		(3,908,646	)
Balance - end	$	86,935,640		$	86,546,820		$	86,935,640		$	86,546,820
Total Bankrupt Accounts:
Balance - beginning	$	6,367,294		$	5,823,878		$	6,115,375		$	5,618,931
Charge offs, gross		(119,370	)		(149,467	)		(298,710	)		(317,032	)
Adjustments		263,733			176,962			694,992			549,474
Balance - end	$	6,511,657		$	5,851,373		$	6,511,657		$	5,851,373
Total Gross Outstanding Receivables	$	93,447,297		$	92,398,193		$	93,447,297		$	92,398,193

19

Below is a reconciliation of the amounts of the loans originated and repaid (collections) from the receivable roll-forward to the amounts shown in our Consolidated Statements of Cash Flows.

	Six Months Ended March 25,
	2008			2007
Finance Receivables Originated:
Direct consumer	$	34,375,610		$	36,079,206
Consumer sales finance		10,287,704			8,444,467
Motor vehicle installment sales		7,878,166			9,114,113
Total gross finance receivables originated		52,541,480			53,637,786
Non-cash items included in gross finance receivables*		(14,185,060	)		(15,541,200	)
Finance receivables originated - cash flows	$	38,356,420		$	38,096,586
Finance Receivables Repaid:
Collections
Direct consumer	$	25,286,328		$	27,466,213
Consumer sales finance		3,517,767			2,887,849
Motor vehicle installment sales		6,859,026			7,190,380
Finance receivables repaid - cash flows	$	35,663,121		$	37,544,442

* Includes precomputed interest and fees (since these amounts are included in the gross amount of finance receivables originated but are not advanced in the form of cash to customers) and refinanced receivables balances (since there is no cash generated from the repayment of original finance receivables refinanced).

Segments and Seasonality

We segment our business operations into the following two segments:

• consumer finance and sales; and

• automotive finance and sales.

The consumer finance and sales segment is comprised primarily of small consumer loans and sales of consumer goods such as furniture, appliances and electronics. We typically experience our strongest financial performance for the consumer finance and sales segment during the holiday season, which is our first fiscal quarter ending December 25.

The automotive finance and sales segment is comprised exclusively of used vehicle sales and their related financing. We typically experience our strongest financial performance for the automotive finance and sales segment during our second fiscal quarter ending March 25 when demand for used cars is at its highest. Please refer to Note 12 in the “Notes to Consolidated Financial Statements” for a breakdown of our operations by segment.

Net Interest Margin

A principal component of our profitability is our net interest margin, which is the difference between the interest that we earn on finance receivables and the interest that we pay on borrowed funds. In some states, statutes regulate the interest rates that we may charge our customers, while, in other locations, competitive market conditions establish interest rates that we

20

may charge. Differences also exist in the interest rates that we earn on the various components of our finance receivable portfolio.

Unlike our interest income, our interest expense is sensitive to general market interest rate fluctuations. These general market fluctuations directly impact our cost of funds. Our general limited ability to increase the interest rates earned on new and existing finance receivables restricts our ability to react to increases in our cost of funds. Accordingly, increases in market interest rates generally will narrow our interest rate spread and lower our profitability, while decreases in market interest rates generally will widen our interest rate spread and increase our profitability. Significant increases in market interest rates will likely result in a reduction in our liquidity and profitability and impair our ability to pay interest and principal on the debentures. See “Quantitative and Qualitative Disclosures About Market Risk” below.

The following table presents important data relating to our net interest margin:

	As of, or for, the Three Months Ended March 25,						As of, or for, the Six Months Ended March 25,
	2008			2007			2008			2007
Average net finance receivables (1)	$	80,135,788		$	78,716,789		$	80,192,195		$	79,433,641
Average notes payable (2)	$	87,545,341		$	86,783,740		$	87,929,858		$	87,106,029
Interest income	$	3,765,409		$	3,769,238		$	7,356,562		$	7,636,775
Loan fee income, excluding delinquency fees		1,083,754			982,042			2,480,793			2,249,110
Total interest and fee income		4,849,163			4,751,280			9,837,355			9,885,885
Interest expense		2,046,379			1,945,927			4,111,892			3,886,996
Net interest and fee income before provision for credit losses	$	2,802,784		$	2,805,353		$	5,725,463		$	5,998,889
Average interest rate earned (annualized)		24.2	%		24.1	%		24.5	%		24.9	%
Average interest rate paid (annualized)		9.4	%		9.0	%		9.4	%		8.9	%
Net interest rate spread (annualized)		14.9	%		15.2	%		15.2	%		16.0	%
Net interest margin (annualized) (3)		14.0	%		14.3	%		14.3	%		15.1	%

⁽¹⁾ Averages are computed using month-end balances of finance receivables (net of unearned interest/fees, unearned insurance commissions, and unearned discounts) during the period presented.

⁽²⁾ Averages are computed using month-end balances of interest bearing debt during the period presented.

⁽³⁾ Net interest margin represents net interest income (before provision for credit losses) divided by the average net finance receivables.

Analysis of Allowance for Credit Losses

An allowance for credit losses is maintained to account for the probable losses inherent in the finance receivable portfolio. The allowance is calculated based upon management’s estimate of the expected collectability of loans outstanding based upon a variety of factors, including, without limitation, periodic analysis of the loan portfolio, historic loan loss experience,

21

borrowers’ ability to repay and collateral considerations. We maintain an allowance for credit losses at a level that we consider adequate to provide for probable losses based on historical ratios of charge-offs to average notes receivable.

The following table shows these ratios of charge offs to average notes receivable for the categories of our finance receivables. The average net finance receivables are computed using monthly balances, net of unearned interest, unearned insurance commissions and unearned discounts. Charge offs are shown at gross amounts as presented in the receivable roll-forward on page 19. Recoveries represent receipts from non-file insurance claims and cash recoveries.

	As of, or for, the Three Months Ended March 25,						As of, or for, the Six Months Ended March 25,
	2008			2007			2008			2007
Direct Consumer Loans and Consumer Sales Finance Contracts:
Average net finance receivables	$	53,968,894		$	53,091,307		$	54,141,898		$	53,880,912
Charge offs - direct consumer	$	859,943		$	910,202		$	2,253,612		$	1,926,506
Charge offs - consumer sales finance		248,883			309,127			487,841			764,799
Charge offs - bankruptcy		119,370			149,467			298,710			317,032
Total gross charge offs		1,228,196			1,368,796			3,040,163			3,008,337
Recoveries (all direct consumer)		(527,500	)		(667,016	)		(1,173,724	)		(1,425,862	)
Charge offs, net	$	700,696		$	701,780		$	1,866,439		$	1,582,475
Percent of net charge offs to average receivables		1.3	%		1.3	%		3.4	%		2.9	%
Motor Vehicle Installment Sales Contracts:
Average outstanding finance receivables	$	26,166,894		$	25,625,482		$	26,050,298		$	25,552,729
Charge offs, gross	$	310,416		$	344,529		$	615,100		$	631,539
Recoveries		—			—			—			—
Charge offs, net	$	310,416		$	344,529		$	615,100		$	631,539
Percent of net charge offs to average receivables		1.2	%		1.3	%		2.4	%		2.5	%
Total Receivables:
Average outstanding finance receivables	$	80,135,788		$	78,716,789		$	80,192,196		$	79,433,641
Charge offs, gross	$	1,538,612		$	1,713,325		$	3,655,263		$	3,639,876
Recoveries (all direct consumer)		(527,500	)		(667,016	)		(1,173,724	)		(1,425,862	)
Charge offs, net	$	1,011,112		$	1,046,309		$	2,481,539		$	2,214,014
Percent of net charge offs to average receivables		1.3	%		1.3	%		3.1	%		2.8	%

22

As of March 25, 2008 and September 25, 2007, our allowance for credit losses was $3.7 million.

Delinquency Information

Our delinquency levels reflect, among other factors, changes in the mix of loans in the portfolio, the quality of receivables, the success of collection efforts, bankruptcy trends and general economic conditions. The delinquency information in the following tables is computed on the basis of the amount past due in accordance with the original payment terms of the loan (contractual method). We use the contractual method for all external reporting purposes. Management closely monitors delinquency using this method to measure the quality of our loan portfolio and the probability of credit loss. We also use other tools, such as a recency report, which shows the date of the last full contractual payment received on the loan, to determine a particular customer’s willingness to pay. For example, if a delinquent customer has made a recent payment, we may decide to delay more serious collection measures, such as repossession of collateral. However, such a payment will not change the non-accrual status of the account until all of the principal and interest amounts contractually due are brought current (we receive one or more full contractual payments and the account is less than 60 days contractually delinquent), at which time we believe future payments are reasonably assured. Below is certain information relating to the delinquency status of each category of our receivables for the quarters ended March 25, 2008 and 2007:

	As of March 25, 2008
	Direct Consumer Sales			Consumer Sales Finance Contracts			Motor Vehicle Installment Sales Contracts			Bankruptcy Accounts			Total
Gross Loans and Contracts Receivables	$	37,901,014		$	16,813,744		$	32,220,882		$	6,511,657		$	93,447,297
Loans and Contracts 60 - 90 days past due	$	631,544		$	258,309		$	29,753		$	170,864		$	1,090,470
Percentage of Outstanding		1.7	%		1.5	%		0.1	%		2.6	%		1.2	%
Loans and Contracts greater than 90 days past due	$	10,979,004		$	3,474,018		$	111,930		$	3,856,930		$	18,421,882
Percentage of Outstanding		29.0	%		20.7	%		0.3	%		59.2	%		19.7	%
Loans and Contracts greater than 60 days past due	$	11,610,548		$	3,732,327		$	141,683		$	4,027,794		$	19,512,352
Percentage of Outstanding		30.6	%		22.2	%		0.4	%		61.9	%		20.9	%

23

	As of March 25, 2007
	Direct Consumer Sales			Consumer Sales Finance Contracts			Motor Vehicle Installment Sales Contracts			Bankruptcy Accounts			Total
Gross Loans and Contracts Receivables	$	41,419,988		$	13,284,095		$	31,842,737		$	5,851,373		$	92,398,193
Loans and Contracts 60 - 90 days past due	$	540,369		$	137,402		$	11,843		$	200,772		$	890,386
Percentage of Outstanding		1.3	%		1.0	%		0.0	%		3.4	%		1.0	%
Loans and Contracts greater than 90 days past due	$	10,568,511		$	2,797,097		$	26,608		$	3,264,466		$	16,656,682
Percentage of Outstanding		25.5	%		21.1	%		0.1	%		55.8	%		18.0	%
Loans and Contracts greater than 60 days past due	$	11,108,880		$	2,934,499		$	38,451		$	3,465,238		$	17,547,068
Percentage of Outstanding		26.8	%		22.1	%		0.1	%		59.2	%		19.0	%

Results of Operations

Comparison of Six Months Ended March 25, 2008 and 2007

Net Revenues

Net revenues were $13.9 million and $14.9 million for the six months ended March 25, 2008 and 2007, respectively. Increases in interest expense and the provision for credit losses as well as decreases in commissions earned on the sale of insurance products and other ancillary products to customers resulted in the $1.0 million decrease in net revenues.

Net Interest and Fee Income Before Provision for Credit Losses

Net interest and fee income before provision for credit losses was $5.7 million and $6.0 million for six months ended March 25, 2008 and 2007, respectively. During the first half of fiscal year 2008, gross interest and fee income decreased $0.1 million to $9.8 million. Interest expense was $4.1 million and $3.9 million for the six-month periods ended March 25, 2008 and 2007, respectively. Interest associated with variable rate subordinated debentures outstanding, which increased $3.3 million since March 25, 2007, resulted in the increase in interest expense.

Provision for Credit Losses

Provision for credit losses was $2.5 million and $2.1 million for six months ended March 25, 2008 and 2007, respectively. Finance receivables charged off were approximately the same as the previous year, while recoveries of charge offs decreased by approximately $0.3 million. Additional provisions for credit losses of $0.1 million resulted from an increase in the allowance for credit losses over the same period last year.

24

Insurance and Other Products

Income from commissions on insurance products and motor club memberships decreased $0.4 million, to $5.8 million from $6.2 million for the six months ended March 25, 2008 and 2007, respectively. Although the volume of finance receivables originated decreased slightly during this six-month period compared to last year, we originated a greater volume of sales finance contracts and a lower volume of direct consumer loans. Sales finance contracts generally carry fewer insurance products than direct consumer loans resulting in lower commissions earned. Other income including delinquency fees were approximately $0.1 million lower than the same period last year.

Gross Margin on Retail Sales

Gross margins on retail sales were $3.6 million and $3.5 million for six months ended March 25, 2008 and 2007, respectively. Margins in the consumer segment in the first half of this year were up $0.3 million over the same period last year while margins in the automotive segment were down $0.2 million. Sales in the consumer segment were approximately $0.7 million higher than last year while vehicle sales were down approximately $0.9 million.

Operating Expenses

Operating expenses were $13.9 million and $14.0 million for six months ended March 25, 2008 and 2007, respectively. Personnel expense, facilities expense and general and administrative expenses were approximately the same as last year. Other operating expenses were down approximately 10% due to decreased level of spending for advertising, postage, and other solicitation costs. Decreases in automotive, lodging and meals expense were a result of a decrease in the number of personnel required to travel.

Comparison of Three Months Ended March 25, 2008 and 2007

Net Revenues

Net revenues were $6.9 million and $7.1 million for the three months ended March 25, 2008 and 2007, respectively. An increase in interest expense along with a decrease in commissions earned on insurance products were the primary factors in the decrease in net revenues.

Net Interest and Fee Income Before Provision for Credit Losses

Net interest and fee income before provision for credit losses was $2.8 million for each of the three month periods ended March 25, 2008 and 2007. During the second quarter of fiscal year 2008, gross interest and fee income increased $0.1 million over the second quarter of 2007. Interest expense was $2.0 million and $1.9 million for the three-month periods ended March 25, 2008 and 2007, respectively.

Provision for Credit Losses

Provision for credit losses was $0.9 million for each of the three month periods ended March 25, 2008 and 2007. Finance receivables charged off and recoveries of charged off loans were approximately the same in each of these periods.

Insurance and Other Products

Income from commissions on insurance products and motor club memberships were $2.8 million and $3.0 million for the three months ended March 25, 2008 and 2007, respectively, a decrease of approximately $0.2 million. Although the volume of finance receivables originated decreased during this three-month period compared to last year, we originated a greater volume of sales finance contracts and a lower volume of direct consumer loans. Sales finance contracts generally carry fewer insurance products than direct consumer loans resulting in lower commissions earned. Other income and delinquency fees were down slightly in the second quarter of this fiscal year compared to the same period last year.

25

Gross Margin on Retail Sales

Gross margins on retail sales were $1.6 million for each of the three month periods ended March 25, 2008 and 2007. Sales in the automotive segment for the three-month period in 2008 were down from the same period last year by $0.3 million while margins decreased $0.1 million. Sales and margins in the consumer segment were up $0.1 million in the three months this year over last year.

Operating Expenses

Operating expenses were $7.0 million and $7.1 million for three months ended March 25, 2008 and 2007, respectively. Personnel expenses were approximately $0.1 million higher during the second quarter of fiscal year 2008 as compared to 2007. Other operating expenses were down approximately $0.2 million (12%) due to a decreased level of spending for advertising, postage, and other solicitation costs. Decreases in automotive, lodging and meals expense were a result of a decrease in the number of personnel required to travel.

Liquidity and Capital Resources

General

Liquidity is our ability to meet short-term financial obligations whether through collection of receivables, sales of Debentures and Demand Notes or by generating additional funds through sales of assets to our competitors (such as our finance receivables or vehicle inventory). Continued liquidity is, therefore, largely dependent on the collection of our receivables and the sale of debt securities that meet the investment requirements of the public. We believe the cash flow from our operations coupled with sales of the Debentures and Demand Notes will be sufficient to cover our liquidity needs and cash flow requirements during 2008.

Liquidity management refers to our ability to generate sufficient cash to fund the following primary uses of cash:

• meet all of our debenture and demand note redemption obligations;

• pay interest on all of our debentures and demand notes;

• pay operating expenses; and

• fund consumer finance loan demand and used automobile vehicle inventory.

The primary objective for liquidity management is to ensure that at all times we can meet the redemption obligations of our note holders. A secondary purpose of liquidity management is profit management. Because profit and liquidity are often conflicting objectives, we attempt to maximize our net interest margin by making adequate, but not excessive, liquidity provisions. To the extent we have adequate cash to meet our redemption obligations and pay interest to our note holders, we will use remaining cash to make consumer finance loans, purchase used automobile vehicle inventory and invest in other sources of potential revenues.

Changes in our liquidity position result from operating, investing and financing activities. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of our net income, including, without limitation, purchases of used automobiles, electronics, furnishings and other consumer goods for resale to our customers. The primary investing activities include consumer loan originations and purchases and collections on such consumer loans. Our financing activities focus almost entirely on the sale of Debentures and Demand Notes.

26

Cash and cash equivalents increased to $17.7 million at March 25, 2008 from $16.7 million at March 25, 2007. Cash and cash equivalents decreased $0.1 million during the six months ended March 25, 2008. During the first half of fiscal 2008, the primary sources of cash were net cash provided by operating activities of $4.0 million. Net cash used in financing activities was $1.1 million. Although we issued $7.6 million in debentures, we redeemed $6.8 million of debentures and had a net decrease in demand notes of $1.8 million. Cash and cash equivalents increased $3.8 million during the six months ended March 25, 2007 primarily as a result of net cash being provided by operating activities. Net cash used in investing activities was $0.8 million as a result of loans originated exceeding loans repaid by $0.6 million. Proceeds from the sale of debentures exceeded redemptions of debentures by $1.4 million, however demand note redemptions exceeded sales of demand notes by $1.6 million and other components of debt were reduced by $0.6 million resulting in a $0.7 million increase in net cash used in financing activities.

During 2008, we expect to continue to use a significant amount of net offering proceeds we raise from the sale of Debentures and Demand Notes to fund redemption obligations and pay interest on our securities. We will use any remaining net offering proceeds to fund our consumer loan demand, purchase used automobiles, and to fund the other company activities.

Debentures and Demand Notes

During the six months ended March 25, 2008, we (1) received gross proceeds of $7.6 million from the sales of debentures, and (2) paid $6.8 million for redemption of debentures and $1.8 million for net redemptions of demand notes for us and our subsidiary, The Money Tree of Georgia, Inc. As of March 25, 2008, we and this subsidiary had $82.6 million of debentures and $4.2 million of demand notes outstanding compared to $81.9 million of debentures and $6.0 million of demand notes outstanding, as of September 25, 2007.

Recent Accounting Pronouncements

Recent accounting pronouncements have been issued that may have a future effect on operations. Refer to Note 3 to the unaudited consolidated financial statements for a discussion of these pronouncements and their possible effects.

Critical Accounting Policies

Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and predominant practice within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

We believe that the determination of our allowance for credit losses involves a higher degree of judgment and complexity than our other significant accounting policies. The Allowance for Credit Losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, loss given default, the amounts and timing of expected future cash flows on impaired loans, and general amounts for historical loss experience. We also consider economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management’s estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

27

Finance receivables are considered impaired (i.e. income recognition ceases) as a result of past-due status or a judgment by management that, although payments are current, such action is prudent. Finance receivables on which payments are past due 90 days or more are considered impaired unless they are well-secured and in the process of collection or renewal. Any losses incurred from finance receivables that are impaired are charged off at 180 days past due. Related accrued interest and fees are reversed against current period income.

When a loan is impaired, interest accrued but uncollected is generally reversed against interest income. Cash receipts on impaired loans are generally applied to reduce the unpaid principal balance.

We recognize deferred tax assets and liabilities for the future tax effects of temporary differences, net operating loss carry-forwards and tax credits. Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not. If management determines that we may be unable to realize all or part of net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the expected realizable amount.

We have not substantially changed any aspect of our overall approach in the application of the foregoing policies. There have been no material changes in assumptions or estimation techniques utilized as compared to previous years.

Impact of Inflation and General Economic Conditions

Although inflation has not had a material adverse effect on our financial condition or results of operations, increases in the inflation rate are generally associated with increased interest rates. A significant and sustained increase in the interest rates would likely unfavorably impact our profitability by reducing the interest rate spread between the rate of interest we receive on our customer loans and interest rates we pay to our note holders, banks and finance companies. Inflation may also negatively affect our operating expenses.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our profitability and financial performance are sensitive to changes in the U.S. Treasury yields and the spread between the effective rate of interest we receive on customer loans and the interest rates we pay on our borrowings. Our finance income is generally not sensitive to fluctuations in market interest rates. The primary exposure that we face is changes in interest rates on our borrowings. A substantial and sustained increase in market interest rates would likely adversely affect our growth and profitability since we will be required to increase the interest rates we pay to holders of debentures at the end of each interest adjustment period. We would also face pressure to increase interest rates on our demand notes to stay competitive. The overall objective of our interest rate risk management strategy is to mitigate the effects of changing interest rates on our interest expense through the utilization of short-term variable rate debt and medium and long term fixed rate debt. We have not entered into any derivative instruments to manage our interest rate risk. Please see Note 7 in the notes to our unaudited consolidated financial statements for information on our debt, including maturities and interest rates.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

28

In connection with the presentation of this Form 10-Q, management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter which is the subject of this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the design and operation of our disclosure controls and procedures are effective as of March 25, 2008.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 25, 2008, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

29

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We were not involved in any material legal proceedings during the quarter ended March 25, 2008 requiring disclosure under item 103 of Regulation S-K.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 25, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Certification of Principal Executive Officers pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

30

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE MONEY TREE INC.
May 9, 2008	/s/ Bradley D. Bellville
Date	Bradley D. Bellville
	President (Principal Executive Officer)
May 9, 2008	/s/ Steven P, Morrison
Date	Steven P. Morrison
	Chief Financial Officer (Principal Financial Officer)

31

EX-31.1

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER

CERTIFICATION

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

I, Bradley D. Bellville, certify that:

1. I have reviewed this quarterly report for the fiscal quarter ended March 25, 2008 on Form 10-Q of The Money Tree Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have;

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008	By:	/s/ Bradley D. Bellville
		Bradley D. Bellville
		Principal Executive Officer

EX-31.2

Exhibit 31.2

PRINCIPAL FINANCIAL OFFICER

CERTIFICATION

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

I, Steven P. Morrison, certify that:

1. I have reviewed this quarterly report for the fiscal quarter ended March 25, 2008 on Form 10-Q of The Money Tree Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have;

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008	By:	/s/ Steven P. Morrison
		Steven P. Morrison
		Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

In connection with the Quarterly Report of The Money Tree Inc. (the “Company”) on Form 10-Q for the quarter ended March 25, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Bradley D. Bellville, Chief Executive Officer of the Company, and Steven P. Morrison, Chief Financial Officer of the Company, hereby certify pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that, to the best of our knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2008	By:	/s/ Bradley D. Bellville
		Bradley D. Bellville
		Chief Executive Officer
Date: May 9, 2008	By:	/s/ Steven P. Morrison
		Steven P. Morrison
		Chief Financial Officer