Case 1:13-cv UA Document 1 Filed 06/27/13 Page 1 of 27

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1 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 1 of 27 CHARLES NUTSCI-I, Individually and on Behalf of All Others Similarly Situated. Civil Action No. <04? vs. Plaintiff, CLASS ACTION CO AINT FOR VIOLATIONS OF T FEDERAL SECURITIES LA CASH STORE FINANCIAL SERVICES, INC., GORDON REYKDAL, CRAIG WARNOCK, and NANCY BLAND Defendants. Jury Trial Demanded Plaintiff. Charles Nutsch, by his attorneys, alleges the following upon information and belief, except for those allegations that pertain to Plaintiff and his attorneys, which are based on personal knowledge. Plaintiff's information and belief are based upon, among other things. Counsel's investigation, which included, inter a/ia, review and analysis of filings by Cash Store Financial Services, Inc. ("Cash Store" or the "Company") with the United States Securities and Exchange Commission ("SEC"), press releases, conference calls, news articles, and analyst reports. Plaintiff believes that substantial, additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a federal securities class action brought pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") on behalf of all purchasers of Cash Store common stock on the New York Stock Exchange (NYSE") from November 24, 2010 until and through May 13, 2013, inclusive (the Class Period") and who were damaged thereby. 1

2 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 2 of Defendant Cash Store is a pay-day lender based in Alberta, Canada. The Company primarily operates in Canada, where it maintains 579 branches under banners "Cash Store Financial" and "Instaloans." During the Class Period, Cash Store was traded on the NYSE under the ticker symbol "CSFS." 3. Beginning on November 24, 2010, Cash Store made a series of false and misleading statements concerning the Company's financial condition that caused the Company's shares to trade at an artificially high price. 4. Specifically, during the Class Period, the Company made a number of false and misleading statements in its quarterly and annual financial statements in which it overvalued a major loan portfolio it had acquired. Additionally, the Company understated its liabilities associated with a class action settlement. 5. On December 10, 2012, the Company revealed that it needed to restate its financial statements and that it had inappropriately accounted for the acquisition of a large loan portfolio in violation of U.S. Generally Accepted Accounting Principles ("GAAP"). Specifically, the Company determined that a $36.8 million premium should have been recorded as an expense. The Company further stated that it was going to restate the fair value of the loans acquired to $50 million from which the Company had paid $116.3 million and that its provision for loan losses for the three month periods ending March 31, 2012 and June 30, 2012 was understated by $3.3 million and $3.7 million, respectively. Significantly, the Company admitted that material weaknesses existed as to the Company's internal controls and that such weaknesses led to the restatement. 6. On January 3, 2013, Cash Store filed its restated financial statements for the three and six months ended March 31, 2012 and the three and nine months ended June 30, The restatements revealed that several areas of the income statement and balance sheet required 2

3 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 3 of 27 restatement as a result of inappropriate application of GAAP regarding accounting for asset acquisitions, fair value measurement and accounting for loan losses. Overall, the restatement revealed that Cash Store had overstated net income by over $30 million in the first three months ended March 31, The Company also disclosed that immediate family members of Cash Store's directors and one executive profited from the transaction involving the loan acquisition. 7. On April 9, the Company announced that it received notice from the NYSE that it was not in compliance with certain standards for continued listing of its shares and that under NYSE rules, the Company had 18 months from April 2, to submit aplan to demonstrate its ability to achieve compliance with listing standards. 8. The full truth was finally revealed on May 13, when the Company announced that it would again have to restate financial results because the previous annual and interim financial statements improperly calculated the losses accrued due to a lawsuit settlement. Although every financial statement filed with the SEC estimated liability relating to the lawsuit to be approximately $18 million, in reality the losses were $23.3 million -- or approximately 25% higher than previously reported. The Company admitted that its previous financial reports should not be relied upon and that material weaknesses in internal controls for accounting existed during all periods dating back to As a result of the foregoing, Cash Store stock plummeted approximately 71.25%, from its Class Period high of $17.10 per share to $3.83 at the close of the Class Period, resulting in millions of dollars of losses to Class Members. JURISDICTION AND VENUE 10. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act [15 U.S.C. 78j(b) and 78t(a)] and Rule I Ob-5 promulgated thereunder by the SEC [17 C.F.R Ob-5]. 'l

4 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 4 of This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C and Section 27 of the Exchange Act. 12. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U. S.C. 1391(b) as the securities of Cash Store are publicly traded on the NYSE, which is located in this District. 13. Additionally, venue is proper because Cash Store conducts business and maintains a registered agent at National Corporate Research, Ltd., 10 East 40th St., 10th Floor, New York, NY in this District. PARTIES 14. Plaintiff Charles Nutsch purchased the common stock of Cash Store during the Class Period as set forth in the attached certification and was damaged thereby. 15. Defendant Cash Store is a pay-day lender and a leading provider of alternative financial products and services. It boasts 579 branches in Canada alone. The Company facilitates shortterm advances and other financial services through its agent brokers and lenders, arranging for advances to customers ranging from $100 to $1,500. The Company operates eight frilly owned subsidiary entities, including two of the most recognizable brands in the alternative financial services market in Canada - Cash Store Financial and Instaloans - each of which hold dominant positions in all key Canadian markets. The Company represents that by branch count, the Company holds over 36% of Canadian market share; it is the only broker of short-term advances that is publicly traded on the Toronto Stock Exchange. The Company also trades common stock on the NYSE and has been registered with the SEC since June 1, Defendant Gordon Reykdal ("Reykdal") was the Chairman of the Board and CEO of Cash Store during the Class Period. 4

5 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 5 of Defendant Michael Warnock ("Warnock") has served as Cash Store's Chief Financial Officer since.july 1, Defendant Nancy Bland ("Bland") was the Company's Chief Financial Officer until her surprise resignation on May 30, Defendants Reykdal, Warnock, and Bland are collectively referred to herein as the "Individual Defendants." SUBSTANTIVE ALLEGATIONS I :IArsi roi (s1uji IIJ 20. On June , Cash Store announced that its shares had been authorized for listing on the NYSE. In connection with its application, Cash Store filed a registration statement Form 40-F with the SEC that stated an increase in annual revenue of approximately $20 million for the fiscal year ended June 30, 2009, recording $150.3 million in revenues compared to $130.6 million for the fiscal year ended June 30, The following day, the Company changed its financial year-end from June 30 to September 30 to better synchronize its financial reporting with its business planning. MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD 21. On November 24, 2010, the Company issued a news release via a Form 6-K filed with the SEC announcing the Company's financial results for the fifteen month period ending September 30, Defendant Reykdal stated that revenue increased 47.4% in the fifteen month period ended September 30, He further stated that the earnings per share were up 19.7% from the same three-month period the previous year. 22. An exhibit attached to the Company's Form 40-F. EX-99.3, titled "Management's Discussion and Analysis [MD&A] for the Three and Fifteen Months Ended September 30, 2010," filed with the SEC on November 26, 2010, stated. "Net income for the fifteen month 5

6 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 6 of 27 period ended September 30, 2010, after removing class action settlement costs and related taxes was $28.5 million, compared to $19.4 million for the year ended June 30, 2009." 23. On this news, shares of Cash Store rose 10% to close at $14.69 by November 29, Significantly, the November 26, 2010 Form 40-F included separate certifications by defendants Reykdal and Bland pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 ("SOX"). Section 302 of SOX, entitled "Corporate responsibility for financial reports" directs that the SEC shall promulgate regulations requiring that, in relevant part, for each company filing periodic reports under section 13(a) or 15(d) of the Securities Exchange Act of the principal executive officer or officers and the principal financial officers or officers, or person performing similar functions, certify in each annual or quarterly report filed or submitted under either such section of such Act that: (1) the signing officer has reviewed the report; (2) based on the officer's knowledge, the report does not contain any untrue statement of a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading; (3) based on such officer's knowledge, the financial statements and other financial information included in the report, fairly present in all material respects the financial condition and results of operations of the issuer as of, and for, the periods presented in the report; (4) the signing officers: (A) (B) (C) are responsible for establishing and maintaining internal controls; have designed such internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared; have evaluated the effectiveness of the issuers internal controls as of a date within 90 days prior to the report; and

7 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 7 of 27 D) have presented in the report their conclusions about the effectiveness of their internal controls based on their evaluation of that date. (5) the signing officers have disclosed to the issuer's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function): (A) (B) all significant deficiencies in the design or operation of internal controls which could adversely affect the issuer's ability to record, process, summarize, and report financial data and have identified for the issuer's auditors any material weaknesses in internal controls; and any fraud, whether or not material, that in that involves management or other employees who have a significant role in the issuer's internal controls; and (6) the signing officers have indicated in the report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Emphasis added.' 25. Likewise, 906 of SOX, entitled "Failure of corporate officers to certify financial reports" requires, in relevant part: (a) (b) Certification of Periodic Financial Reports. Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) 78o(d)) shall be accompanied by a written statement by the chief executive officer and chief financial officer (or equivalent thereof) of the issuer. Content. The statement required under subsection (a) shall certify, that the periodic report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act [o]f 1934 (15 U.S.C. 78m(a) 78o(d)) and that information contained in Unless otherwise noted, all emphasis is added. 7

8 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 8 of 27 the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer. 26. The SOX certifications attached as EX-99.3 to Cash Store's November Form 40-F, represented that "falll figures f.. generally accepted accounting principles." are reported in accordance with United States The Company's Form 40-F also stated that: "fdjuring the period covered by this annual report on Form 40-F, no change occurred in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting." 27. On December 29, 2010, the Company filed a Form 6-K with the SEC. In the Chairman's Report section of the attached Annual Report 2010, defendant Reykdal stated that Cash Store "achieved records in most critical categories of our business. These records included [... ] record revenue of $180.2 million, record net income adjusted for class action settlement costs and related taxes was $22.9 million [... ] and record loan volume of $681.4 million." 28. On this news, Cash Store's stock price continued to rise, reaching a high of $17.10 at the close on January 19, On January 12, 2012, Cash Store announced that it intended to offer up to $125 million Canadian dollars aggregate principal amount of Senior Secured Notes (the "Notes") to purchase a loan portfolio. Specifically, Cash Store stated that it planned to use the proceeds of the Notes offering to purchase loan receivable assets from the Company's current third party lenders, for general corporate purposes and to pay fees and expenses to acquire the loan portfolio (the "Loan Acquisition").

9 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 9 of Commenting on the Loan Acquisition, defendant Reykdal stated in a Cash Store news article dated January 12, 20122: We believe that this transaction will financially benefit the Company as it will allow us to transition from a broker model to an on balance sheet direct lending model in those jurisdictions that are regulated. This transition is expected to have many benefits, including access to lower-cost capital and committed funding. The financial flexibility offered by the Notes will support future loan growth associated with the maturing of our branches and our expansion plans. 31. On this news, the stock price rose from $637 to $7.90 over the next three trading days. 32. Throughout 2012, defendant Reykdal continued to tout the Loan Acquisition as helping the Company to be "well-positioned for, sustained long-term growth," Indeed, in announcing the first quarter results on February 8, 2012, defendant Reykdal concluded: "A key strategic focus for management has been sourcing cheaper capital and moving to on-balance sheet lending. On January 31, we concluded a $132.5 million offering of senior secured notes, the majority of proceeds of which were utilized to purchase loans receivable assets held by third-party lenders." As a result of these representations, Cash Store's stock prices traded at an artificially inflated price. 33. On May 14, 2012, the Company filed its Form 6-K with the SEC for the quarter ended March 31, The Form 6-K was signed by Defendants Reykdal and Bland, and contained material misstatements regarding loan loss reserves, the value of the Loan Acquisition, earnings, the effectiveness of internal controls and the cost of settling a class action lawsuit. In short, the May 14, 2012 Form 6-K intentionally, or recklessly, contained false statements concerning the Company's financial statements which constituted violations of U.S. GAAP. 2 Available at http :// /Cash_StoreFinancial Announces Proposed Offering of CDN 1 25 Million Senior Secured5Year_Notes.aspx

10 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 10 of On May 30, 2012, two weeks after the filing of Cash Store's March 2012 Financials, its CFO, Defendant Bland, suddenly resigned. The Company provided no explanation for Brand's abrupt departure other than to state that she was leaving the Company to join her family's business, an equipment sales and service company in Edmonton. In the same press release, the Company announced that defendant Warnock had been appointed the Company's new CFO, effective July 1, 2012 (the first day of the Company's fiscal fourth quarter). 35. On August 14, 2012, the Company filed its Form 6-K with the SEC for the quarter ended June 30, The Company represented that the Loan Acquisition enabled the Company to shift from brokered lending to direct lending. The August 14, K was signed by defendants Reykdal and Warnock and represented in the attached EX-99.2 MD&A that management: "has peiformed an evaluation and has not identified any changes in our internal controls over financial reporting during the most recent interim period ended June 30, 2012 that have material/v affected, or are reasonably likely to materially affect, our internal controls over financial reporting." This statement was false and misleading because, among other reasons, the Form 6-K contained material misstatements regarding loan loss reserves, the value of the Loan Acquisition, earnings, the effectiveness of internal controls and the cost of settling a class action lawsuit. In other words, the August 14, 2012 Form 6-K, like the May 14, 2012 Form 6-K, intentionally, or recklessly, contained false representations concerning the Company's financial statements which constituted violations of U.S. GAAP. Moreover, the Company falsely reported that its internal controls over its financial reporting were sufficient. 36. Given the positive portrayals of the Loan Acquisition and statements concerning the strength of the Company's internal controls throughout the fiscal 2012 year, the market was shocked when on December 10, 2012, the Company announced that it needed to restate its financial statements for the three and six months ended March 31, 2012 and three and nine iii]

11 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 11 of 27 months ended June 30, 2012 because the Company had determined that the Loan Acquisition from January was overvalued. Specifically, the Company announced that the calculation of fair value for the Loan Acquisition, for which the Company paid $116.3 million, was actually worth $50 million - 50% less than what the Company had paid for the loans, and that its provision for loan losses was significantly understated: In accordance with U.S. GAAP, the company has determined that the premium of $36.8 million should have been recognized as an expense as a settlement of pre-existing business relationships with third-party, lenders. The Company will restate the.fair value of the loans receivable acquired to $50.0 million and the fair value of intangible assets acquired to $32.0 million with a corresponding deferred tax liability of $2.5 million. The Company will also adjust the interim financial statements for the periods ended March 3 1, 2012 and June 30, 2012 for any corresponding impact that these restatements have on other financial statement line items. Of the $50 million of loans receivable acquired on January 3 1, 2012 the Company has collected a net amount of $43.5 million to September 30, 2012, of which $5.0 million (three months ended September 30, $1.8 million) represents late interest and default fees from the acquired loans. These amounts collected on the acquired portfolio were entirely applied to reduce the value of the acquired loans receivable on the balance sheet as at September 30, 2012 in accordance with U.S. GAAP. 37. In addition, the Company determined that its provision for loan losses on internally generated loans was understated. As a result, the Company needed to record an additional expense of $' ).3 million and $3.7 million for the three month periods ended March 31, 2012 and June 30, 2012, respectively. 38. Finally, the Board of Directors stated that in connection with the Acquisition, [T]he Company has re-evaluated its conclusions regarding the effectiveness of its internal control over financial reporting for the affected periods and determined that material weaknesses existed at March 31, 2012 and June 30, As a result of the material weaknesses, the Company has now concluded that such controls were ineffective. Accordingly, the company will restate its disclosure as of March 31, 2012 and June 30, 2012 to include the identification of material weaknesses related to the restatements. 39. On the announcement of this news, Cash Store's stock price plummeted approximately 20% from the previous day's closing of $4.27 to $3.42 on unusually high trading volume. 11

12 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 12 of On December 28, the Company announced that a Special Committee of Independent Directors of Cash Store had retained an independent accounting firm to conduct a special investigation related to the acquisition of the consumer loan portfolio from third-party lenders in late January The Company also revealed the existence of previously undisclosed related party transactions in connection with the Loan Acquisition. 41. Through an amended Form 6-K filed on January 3, 2013, before the special investigation had concluded, Cash Store filed its restated financial statements for the three and nine months ended June 30, In its Form 6-K for the period ended March 31, 2012, the Company reported that the restatement corrected the allocation of the total consideration paid for the Loan Acquisition, provision for loan losses, and other immaterial errors. 42. In the January 3, 2013 Form 6-K, the Company disclosed additional facts concerning the Loan Acquisition, namely that the immediate family members of one of Cash Store's directors and one of Cash Store's executives profited from the transaction. Specifically the Company disclosed that an immediate family member of Michael Shaw, a director of the Company, advanced funds to a privately held entity that raised capital and provided loans to the third party lender and acted as a third-party lender prior to the acquisition of the consumer loans portfolio on January 31, $23.9 million of the total purchase consideration was paid to this third-party lender, of which $12.89 million was settled by the issuance of the Notes. 43. Moreover, the father of Senior Vice President of Operations, Cameron Schiffner, controls a privately held entity that raises capital and provides advances to the third party lender from which the Company acquired the loan portfolio. Schiffner' s brother was a member of management of AUC, of which Cash Store owned 18.3% of outstanding shares, and is a member of management of the third-party lender. As part of the Loan Acquisition on January 31, 2012, $45.5 million of the total purchase consideration was paid to this third-party lender and the 12

13 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 13 of 27 acquisition agreement was signed on behalf of the third-party lender by Schiffner's brother. As of March 31, 2012, $ 3.9 million in liabilities accrued due to the third-party lender. 44. The Company's investigation further revealed that several additional areas of accounting required restatement as a result of inappropriate application of U.S. GAAP, including asset acquisitions, fair value measurement, and accounting for loan losses. 45. On April 9, 2013, the Company announced that it received notice from the NYSE that it was not in compliance with certain standards for continued listing of its shares. Specifically, Cash Store was below the NYSE's continued listing criteria because its average total market capitalization over a thirty consecutive day trading period was less than $50 million at the same time that reported shareholders' equity was less than $50 million. As a result of these disclosures, the price of the Company's stock fell from further $2.33 to $ On May 13, 2013, the last day of the Class Period, the Company disclosed that it would again restate financial results because the previous annual and interim financial statements failed to adequately account for the losses accrued due to a class action lawsuit settlement. Although previously filed financial statements with the SEC estimated liability relating to the lawsuit to be approximately $18 million, in reality the losses were $2 3.3 million, thus understated by approximately 25% -- $5.3 million. Additionally, the Company noted that its previous financial reports should not be relied upon and that material weaknesses in the Company's internal controls existed during all periods dating back to As a result, the stock price declined approximately 9.5% from $ 3.40 to $ On May 14, 2013, the Alberta Securities Commission determined that certain of the Company's annual and interim filings were not prepared in accordance with Alberta securities laws. As a result, the Commission ordered a halt to any trading or purchasing of Cash Store stock until the order is revoked or varied. ii

14 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 14 of On May 28, 2013, Cash Store filed a Registration Statement, Form 40-F wherein it announced through an MD&A attached as Exhibit 99.3 that it filed amended and restated consolidated financial statements and MD&A for the years ended September 30, 2012, September 30, 2011 and the fifteen month period ended September 30, 2010, as well as the unaudited interim consolidated financial statements for the periods ended December 31, 2011, March 31, 2012, June 30, 2012 and December 31, The Company stated that it reevaluated its conclusions regarding the effectiveness of its internal control over financial reporting for the affected periods and determined that material weaknesses existed during all periods: During the preparation of the Company's September 30, 2012 annual financial statements, Management determined that the Company did not design and implement effective ICFR [internal controls] related to the identification, assessment and disclosure of related parties and related party transactions. Specifically, the Company did not design effective ICFR to regularly assess existing business relationships to identify, assess and disclose related parties and related party transactions in accordance with applicable accounting standards. As a result of these ineffective controls, the Company did not disclose related party transactions with a third party lender in its previously filed financial statements; however, it has now amended its disclosure of related party transactions in Note 23 of the restated September 30, 2011 annual financial statements to correct for this omission in disclosure. The disclosure that could reasonably be affected by this material weakness is the disclosure of related parties and related party transactions. During the preparation of the Company's March interim financial statements, Management determined that the Company did not design and implement effective IGFR related to the review and interpretation of complex legal agreements. Specifically, the Company's ICFR did not correctly interpret how the settlement terms and conditions of the March 5, 2004 British Columbia Class Action claim impacted the measurement of the associated liability as at September 30, As a result of these ineffective controls, the Company incorrectly measured and recorded the liability in its previously filed financial statements; however, it has now corrected for this error as described Note 3 of the Company's September 30, 2011 restated annual financial statements. The accounts that could reasonably be affected by this material weakness are class action settlement expense, interest expense, income tax expense, other receivables (current and long term), deferred tax asset and accrued liabilities. 14

15 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 15 of 27 Additionally, in EX-99.2 to the May 28th, 2013 Form 6-K. the MD&A for the three months and year ended September 3 0th, 2012 (Restated), the Company admitted: Management did not maintali, effective processes and controls specific to accounting for the January 31, 2012 acquisition of the portfolio of consumer loans. Management did not effectively research, develop, communicate and implement an accounting policy with respect to this non-recurring transaction. In addition, management did not implement sufficient preventative and detective controls governing the determination of the key valuation assumptions associated with the assets acquired and allocation of the purchase price. The Company has now corrected for the error as described in Note 3 of the Company's March 31, 2012 restated interim financial statements. The accounts that could reasonably be affected by this material weakness are consumer loans receivable, net, intangible assets, deferred taxes and premium paid to acquire the loans. Management did not maintain effective processes and controls specific to the determination of the provision for loan losses. Senior finance personnel did not effectively communicate with operations to obtain a sufficient understanding in making the determination of the provision for loan losses. This material weakness resulted in material errors in the unaudited interim financial statements. Further, there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis. The Company has now corrected for the errors as described in Note 3 of the Company's March 31, 2012 restated interim financial statements. The accounts that could reasonably be affected by this material weakness are provision for loan losses and consumer loans receivable, net. Year ended September Year ended September As Reported Adjustments Restated As Reported Adjustments Restated Interest expense Class action settlements INCOME (LOSS) BEFORE INCOME TAXES PROVISION FOR INCOME TAXES - Deferred (recovery) NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) $ - $ 616 $ 616 $ 11,623 $ 716 $ 12,339 3,206 (2,838) (69) (69) 14,667 2,222 16,889 (56,230) (647) (56,877) (532) (9,570) (214) (9,784) 9,042 1,537 10,579 (43,089) (433) (43,522) BASIC EARNINGS PER SHARE $ 0.52 $ 0.09 $ 0.61 $ (2.47) $ (0.03) $ (2.50) DILUTED EARNINGS PER SHARE (2.47) (0.03) (2.50) 15

16 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 16 of As a result of the Company's false and misleading statements, Cash Store stock has fallen 71.25% during the Class Period, resulting in millions of dollars in losses to Class Members. E*:ES, fjc (CSF5) I :... H DEFENDANTS KNOWINGLY OR RECKLESSLY VIOLATED U.S. GAAP 50. Effective for financial statements issued after September 15, 2009, the Financial Accounting Standards Board ("FASB") has codified generally accepted accounting principles, or "GAAP." FASB ASC Topic establishes the FASB Accounting Standards Codification ("ASC") "as the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants." 51. Defendants Reykal, Bland and/or Warnock knowingly or recklessly certified every financial statement filed with the SEC beginning on November 24, 2010 until the quarter ended December 31, 2012, that failed to conform to GAAP. CLASS ACTION ALLEGATIONS 52. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all those who purchased or otherwise acquired the common stock of Cash Store on the NYSE from November 24, 2010 to May 13, 2013, 16

17 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 17 of 27 inclusive, and who were damaged thereby (the "Class"). Excluded from the Class are Defendants, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. 53. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, the Company's common stock was actively traded on the NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Cash Store or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 54. Plaintiff's claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants' wrongful conduct in violation of federal law complained of herein. 55. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class action and securities litigation 56. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: 1) whether the federal securities laws were violated by Defendants' acts as alleged herein; 2) whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business and operations of Cash Store; 17

18 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 18 of 27 3) whether the price of Cash Store common stock was artificially inflated during the Class Period; and 4) to what extent the members of the Class have sustained damages and the proper measure of damages. 57. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small. the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. SCIENTER ALLEGATIONS 58. As alleged herein, Defendants acted with scienter in that Defendants knew, or recklessly disregarded, that the public documents and statements they issued and disseminated to the investing public in the name of the Company or in their own name during the Class Period were materially false and misleading. 59. Pursuant to SOX Sections 302 and 906, Defendants Reykdal, Warnock, and Bland knowingly certified on the Nov. 26, 2010 Form 40-F: "Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings." 60. Each of the Individual Defendants further certified that, as signing officers, they: (A) (B) are responsible for establishing and maintaining internal controls; have designed such internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to such officers by others V.

19 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 19 of 27 within those entities, particularly during the period in which the periodic reports are being prepared; (C) (D) have evaluated the effectiveness of the issuers internal controls as of a date within 90 days prior to the report: and have presented in the report their conclusions about the effectiveness of their internal controls based on their evaluation of that date. 61. Defendants knew and/or recklessly disregarded the falsity and misleading nature of the information that they caused to be disseminated to the investing public, including, but not limited to, the false statements contained in the SOX certifications. The Individual Defendants, because of their positions with Cash Store, controlled the contents of the Company's public statements during the Class Period. Because of their positions and access to material non-public information, these Defendants knew or recklessly disregarded that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations that were being made were false and misleading. As a result, each of these Defendants is responsible for the accuracy of Cash Store's corporate statements and is therefore responsible and liable for the representations contained therein. 62. The scienter of the Defendants is underscored by the Sarbanes-Oxley mandated certifications of Defendants Reykdal, Bland, and Wornack, which acknowledged their responsibility to investors for establishing and maintaining controls to ensure that material information about Cash Store was made known to them, that the Company's disclosure related controls were operating efficiently, and that their financial statements were accurate. LOSS CAUSATION/ECONOMIC LOSS 63. During the Class Period, as detailed herein, Defendants engaged in a scheme to deceive the market and a course of conduct that artificially inflated the price of Cash Store common stock and operated as a fraud or deceit on Class Period purchasers of Cash Store common stock by 19

20 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 20 of 27 failing to disclose and misrepresenting the adverse facts detailed herein. When Defendants' misrepresentations and fraudulent conduct were disclosed and became apparent to the market, the price of Cash Store common stock fell precipitously, as the prior artificial inflation came out. 64. As a result of their purchases of Cash Store common stock during the Class Period, Plaintiff and the other Class members suffered economic loss, i.e., damages, under the federal securities laws. Defendants' false and misleading statements had the intended effect and caused Cash Store common stock to trade at artificially inflated levels throughout the Class Period, reaching a high of $ As the truth about the Company was revealed to the market, the price of Cash Store common stock fell. These declines removed the inflation from the price of Cash Store common stock, causing real economic loss to investors who had purchased Cash Store common stock during the Class Period. 66. The declines in the price of Cash Store common stock after the corrective disclosures were a direct result of the nature and extent of Defendants' fraudulent misrepresentations being revealed to investors and the market. The timing and magnitude of the price declines in Cash Store common stock negate any inference that the loss suffered by Plaintiff and the other Class members was caused by changed market conditions, macroeconomic or industry factors or Company-specific facts unrelated to Defendants' fraudulent conduct. The economic loss suffered by Plaintiff and the other Class members was a direct result of Defendants' fraudulent scheme to artificially inflate the price of Cash Store common stock and the subsequent significant decline in the value of Cash Store common stock when Defendants' prior misrepresentations and other fraudulent conduct were revealed. 20

21 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 21 of 27 b%fl I!.i I 67. At all relevant times, the market for Cash Store common stock was an efficient market for the following reasons, among others: (a) Cash Store's stock met the requirements for listing and was listed and actively traded, on the NYSE, a highly efficient and automated market; (b) As a regulated issuer, Cash Store filed periodic public reports with the SEC and the NYSE; (c) Cash Store regularly communicated with public investors via established market communication mechanisms, including through the regular dissemination of press releases via SEC filings as well as on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services. 68. As a result of the foregoing, the market for Cash Store common stock promptly digested current information regarding Cash Store from all publicly-available sources and reflected such information in the price of Cash Store common stock. Under these circumstances, all purchasers of Cash Store common stock during the Class Period suffered similar injury through their purchase of Cash Store common stock at artificially inflated prices and a presumption of reliance applies. NO SAFE HARBOR 69. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. Many of the specific statements pleaded herein were not identified as "forward-looking statements" when made. To the extent there were any forward-looking statements, there were no meaningful cautionary statements identifying important factors that could cause actual results to 21

22 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 22 of 27 differ materially from those in the purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, Defendants are liable for those false forward-looking statements because at the time each forward-looking statement was made, the particular speaker knew that the particular forwardlooking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of Cash Store who knew that those statements were false when made. ESiUII I Violation of Section 10(b) of the Exchange Act And Rule lob-5 Promulgated Thereunder Against All Defendants 70. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 71. During the Class Period, Defendants disseminated or approved the materially false and misleading statements specified above, which they knew or deliberately disregarded were misleading in that they contained material misrepresentations and/or failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 72. Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company's common stock during the Class Period. 73. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Cash Store common stock. Plaintiff and the Class would not have purchased Cash Store common stock at the prices they paid, or at all, if 22

23 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 23 of 27 they had been aware that the market price had been artificially and falsely inflated by Defendants' misleading statements. 74. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their purchases of Cash Store common stock during the Class Period Violation of Section 20(a) of the Exchange Act Against the Individual Defendants 75. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 76. The Individual Defendants acted as controlling persons of Cash Store within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their ownership and contractual rights, participation in, and/or awareness of the Company's operations and/or intimate knowledge of the financial statements filed by the Company with the SEC and disseminated to the investing public, the Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements that Plaintiff contends are false and misleading. The Individual Defendants were provided with, or had unlimited access to, copies of the Company's reports, press releases, public filings, and other statements alleged by Plaintiff to be false or misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 77. In particular, each of these Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is presumed to have had the power to

24 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 24 of 27 control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same. 78. As set forth above, Cash Store and the Individual Defendants each violated Section 10(b) and Rule 1 Ob-5 by their acts, statements, and omissions as alleged in this Complaint. By virtue of their positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their purchases of Cash Store common stock during the Class Period and revelation of the truth as alleged herein. WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure with Plaintiff serving as class representative; (b) Awarding compensatory damages in favor of Plaintiff and the other Class members against all Defendants for all damages sustained as a result of Defendants' wrongdoing, in an amount to be proven at trial, including pre and post judgment interest thereon; (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (d) Such other and further relief as the Court may deem just and proper.

25 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 25 of 27 Plaintiff hereby demands a trial by jury. JURY TRIAL DEMANDED DATED: June 27, 2013 SCOT +SCOT, A orneys at L, LLP J SEPH. GUGLIELM OSEPI- D. COHEN The Chrysler Building 405 Lexington Avenue, 401h Floor New York, NY Telephone: (212) Facsimile: (212) jguglielmo@scott-scott.com jcohen@scott-scott.com DAVID R. SCOTT SCOTT+SCOTT, Attorneys at Law, LLP 156 S. Main Street P.O. Box 192 Colchester, CT Telephone: (860) Facsimile: (860) david.scott@scott-scottcorn ZELDES 1-IAEGGQUIST & ECK, LLP Amber Eck 625 Broadway, Suite 1000 San Diego, CA Telephone: (619) Facsimile: (619) ambere@zhlaw.com Counsel for Plaintff 25

26 Case 1:13-cv UA Document 1 Filed 06/27/13 Page 26 of 27 THE CASH STORE FINANCIAL SERVICES, INC. CERTIFICATION OF NAMED PLAINTIFF PURSUANT TO FEDERAL SECURITIES LAWS Charles Nutsch ("Plaintiff") declares: I. Plaintiff has reviewed a complaint and authorized its filing. 2. Plaintiff did not acquire the security that is the subject of this action at the direction of plaintiff's counsel or in order to participate in this private action or any other litigation under the federal securities laws. 3. Plaintiff is willing to serve as a representative party on behalf of the class, including providing testimony at deposition and trial, if necessary. 4. Plaintiff has made the following transactions during the Class Period in the securities that are the subject of this action: See Schedule A 5. Plaintiff has not sought to serve or served as a representative party in a class action that was filed under the federal securities laws within the three-year period prior to the date of this Certification except as detailed below: 6. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond Plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the court. I declare under penalty of perjury that the foregoing is true and correct. Executed this /iit-dayoflu/e',2013. ~ Ll 01,U CHARLES~WTS H,