**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM10-QSB**

 

| **ý** | ** ** | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                    |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | **for the quarterly period ended  September 30, 2004.**                                                                                                                                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                      |
| **o**      | ** ** | **TRANSITION  REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                   |
| ** ** | ** ** | **for the transition period from                     to                      .** |

 

**CommissionFile No. 1-13919**

 

**Xponential, Inc.**

(Exact name of smallbusiness issuer as specified in its charter)

 
| **Delaware**                                                     |   | **75-2520896**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) |   | (I.R.S.  Employer Identification No.) |

 

**6400Atlantic Blvd., Suite 190, Norcross, Georgia 30080**

(Address of principalexecutive offices)

 

**(678)720-0660**

(Issuer’s telephone number)

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days Yes ýNo o

 

Check whether theregistrant filed all documents and reports required to be filed by Section 12,13 or 15(d) of the Exchange Act after distribution of securities under a planconfirmed by a court. Yes ýNo o

 

The Company has2,360,828 shares of Common Stock, par value $0.01 per share, outstanding as ofNovember 4, 2004.

 

Transitional SmallBusiness Disclosure Format (Check one): Yes oNo ý

 

 

----

 

**XPONENTIAL,INC.**

 

**INDEX**

** **
| **PART I  - FINANCIAL INFORMATION** | ** **                                                                                      |
|-------------------------------------|-------------------------------------------------------------------------------------------------|
|                                |                                                                                            |
| **Item 1**                          | Consolidated  Financial Statements                                                              |   |
|                                |                                                                                            |   |
|                                | Consolidated Balance Sheets  as of September 30 and June 30, 2004                               |   |
|                                |                                                                                            |   |
|                                | Consolidated  Statements of Operations for the Three Months Ended September 30, 2004, and  2003 |   |
|                                |                                                                                            |   |
|                                | Consolidated  Statements of Cash Flows for the Three Months Ended September 30, 2004 and  2003  |   |
|                                |                                                                                            |   |
|                                | Notes to  Consolidated Financial Statements                                                     |   |
|                                |                                                                                            |   |
| **Item  2**                         | Management’s  Discussion and Analysis or Plan of Operation                                 |   |
|                                |                                                                                            |   |
| **Item 3**                          | Controls and Procedures                                                                         |   |
|                                |                                                                                            |
| **PART II - OTHER INFORMATION**     | ** **                                                                                      |
|                                |                                                                                            |
| **Item  5**                         | Other  Information                                                                              |   |
|                                |                                                                                            |   |
| **Item 6**                          | Exhibits                                                                                        |   |

 

2

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**ITEM 1.         CONSOLIDATEDFINANCIAL STATEMENTS**

 

**XPONENTIAL,INC. AND SUBSIDIARIES**

 

Consolidated BalanceSheets

(In thousands,except share and per share data)

 
| ** **                                                                                                                                                                                      | ** ** | **September 30, 2004** | ** ** | **June 30, 2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-------------------|------------|
| ** **                                                                                                                                                                                      | ** ** | **(Unaudited)**        | ** ** | ** **        | ** ** |
| Assets                                                                                                                                                                                          |       |                   |       |              |       |
| Current assets:                                                                                                                                                                                 |       |                   |       |              |       |
| Cash and cash  equivalents                                                                                                                                                                      |       | $                      | 136        |              | $          | 206 |   |
| Accounts  receivable                                                                                                                                                                            |       | 63                     |       | 73                |       |
| Pawn service  charges receivable                                                                                                                                                                |       | 464                    |       | 489               |       |
| Pawn loans                                                                                                                                                                                      |       | 4,221                  |       | 4,449             |       |
| Inventories, net                                                                                                                                                                                |       | 3,415                  |       | 2,968             |       |
| Investments                                                                                                                                                                                     |       | 1,722                  |       | 3,017             |       |
| Prepaid expenses  and other current assets                                                                                                                                                      |       | 231                    |       | 275               |       |
| Total current  assets                                                                                                                                                                           |       | 10,252                 |       | 11,477            |       |
|                                                                                                                                                                                            |       |                   |       |              |       |
| Property and  equipment, net                                                                                                                                                                    |       | 888                    |       | 869               |       |
| Intangible  assets, net of amortization of $58 and $43 at September 30, 2004 and June 30,  2004, respectively                                                                                   |       | 26                     |       | 35                |       |
| Investment in  American IronHorse Motorcycle Company, Inc.                                                                                                                                      |       | 4,428                  |       | 3,018             |       |
| Other assets                                                                                                                                                                                    |       | 182                    |       | 155               |       |
| Total assets                                                                                                                                                                                    |       | $                      | 15,776     |              | $          | 15,554 |   |
|                                                                                                                                                                                            |       |                   |       |              |       |
| Liabilities and Stockholders’  Equity                                                                                                                                                      |       |                   |       |              |       |
| Current  liabilities:                                                                                                                                                                           |       |                   |       |              |       |
| Accounts payable  and accrued liabilities                                                                                                                                                       |       | $                      | 694        |              | $          | 696 |   |
| Current  installments of notes payable                                                                                                                                                          |       | 357                    |       | 121               |       |
| Total current  liabilities                                                                                                                                                                      |       | 1,051                  |       | 817               |       |
|                                                                                                                                                                                            |       |                   |       |              |       |
| Long term  liabilities                                                                                                                                                                          |       |                   |       |              |       |
| Notes payable –  net of current portion                                                                                                                                                    |       | 3,078                  |       | 3,050             |       |
| Redeemable  preferred stock – Series A; par value $0.01; 5% cumulative dividend,  liquidation preference $5.00 per share; 1,071,636 shares issued at September  30, 2004 and June 30, 2004 |       | 5,358                  |       | 5,358             |       |
| Total long term  liabilities                                                                                                                                                                    |       | 8,436                  |       | 8,408             |       |
|                                                                                                                                                                                            |       |                   |       |              |       |
| Total  liabilities                                                                                                                                                                              |       | 9,487                  |       | 9,225             |       |
|                                                                                                                                                                                            |       |                   |       |              |       |
| Stockholders’  equity:                                                                                                                                                                     |       |                   |       |              |       |
| Preferred stock –  $0.01 par value, 2,500,000 authorized:                                                                                                                                  |       |                   |       |              |       |
| Preferred stock –  Series B; 5% cumulative dividend, liquidation preference $5.00 per share  ($2,500,210); 500,042 issued at September 30, 2004 and June 30, 2004                          |       | 5                      |       | 5                 |       |
| Common stock  $0.01 par value; authorized 10,000,000 shares, issued 2,344,206 as of  September 30, 2004 and June 30, 2004.                                                                      |       | 24                     |       | 24                |       |
| Additional  paid-in capital                                                                                                                                                                     |       | 5,413                  |       | 5,319             |       |
| Retained  earnings                                                                                                                                                                              |       | 822                    |       | 740               |       |
| Accumulated  other comprehensive income                                                                                                                                                         |       | 65                     |       | 281               |       |
| Less treasury  stock, at cost; 25,000 common shares at September 30, 2004 and June 30, 2004,  respectively                                                                                      |       | (40                    | )          | (40               | )          |
| Total  stockholders’ equity                                                                                                                                                                |       | 6,289                  |       | 6,329             |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                |       | $                      | 15,776     |              | $          | 15,554 |   |

 

See accompanyingnotes to consolidated financial statements.

 

3

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**XPONENTIAL,INC. AND SUBSIDIARIES**

 

Consolidated Statementsof Operations

(Unaudited)

 

(In thousands, except per share data)

 
| ** **                                                                                                     | ** ** | **Three Months Ended  September 30, 2004** | ** ** | **Three Months Ended  September 30, 2003** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------|------------|
| Revenues:                                                                                                      |       |                                       |       |                                       |       |
| Merchandise  sales                                                                                             |       | $                                          | 3,032      |                                       | $          | 3,321 |   |
| Pawn service  charges and related fee income                                                                   |       | 1,571                                      |       | 1,654                                      |       |
| Management  advisory and related fee income                                                                    |       | 42                                         |       | 9                                          |       |
| Total revenues                                                                                                 |       | 4,645                                      |       | 4,984                                      |       |
|                                                                                                           |       |                                       |       |                                       |       |
| Cost of sales                                                                                                  |       | 2,330                                      |       | 2,682                                      |       |
| Gross profit                                                                                                   |       | 2,315                                      |       | 2,302                                      |       |
| Expenses:                                                                                                      |       |                                       |       |                                       |       |
| Store operating  expenses                                                                                      |       | 1,421                                      |       | 1,518                                      |       |
| Corporate  administrative expenses                                                                             |       | 682                                        |       | 641                                        |       |
| Depreciation and  amortization                                                                                 |       | 109                                        |       | 111                                        |       |
| Total expenses                                                                                                 |       | 2,212                                      |       | 2,270                                      |       |
| Operating income                                                                                               |       | 103                                        |       | 32                                         |       |
| Interest and  dividend income                                                                                  |       | 41                                         |       | 100                                        |       |
| Interest expense  including preferred dividends of $67 for the three months ended September 30,  2004 and 2003 |       | (150                                       | )          | (161                                       | )          |
| Gain on  disposition of assets                                                                                 |       | —                                     |       | 3                                          |       |
| Gain on sale of  investments                                                                                   |       | 211                                        |       | 1,631                                      |       |
| Net income  before taxes                                                                                       |       | 205                                        |       | 1,605                                      |       |
| Income tax  provision                                                                                          |       | 93                                         |       | 586                                        |       |
| Net income                                                                                                     |       | 112                                        |       | 1,019                                      |       |
| Preferred stock  dividend requirement                                                                          |       | (31                                        | )          | (31                                        | )          |
| Net income  allocable to common stockholders                                                                   |       | $                                          | 81         |                                       | $          | 988 |   |
|                                                                                                           |       |                                       |       |                                       |       |
| Income per  common share (note 4):                                                                             |       |                                       |       |                                       |       |
| Basic                                                                                                          |       | $                                          | 0.03       |                                       | $          | 0.48 |   |
|                                                                                                           |       |                                       |       |                                       |       |
| Diluted                                                                                                        |       | $                                          | 0.03       |                                       | $          | 0.27 |   |

 

See accompanyingnotes to consolidated financial statements.

 

4

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**XPONENTIAL,INC. AND SUBSIDIARIES**

 

Consolidated Statementsof Cash Flows

(Unaudited)

 

(In thousands)

 
| ** **                                                                     | ** ** | **For the  Three Months Ended  September 30, 2004** | ** ** | **For the  Three Months Ended  September 30, 2003** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
|                                                                           |       |                                                |       |                                                |       |
| Cash flows from  operating activities:                                         |       |                                                |       |                                                |       |
| Net income                                                                     |       | $                                                   | 112        |                                                | $          | 1,019 |   |
| Adjustments to  reconcile net income to net cash used in Operating activities: |       |                                                |       |                                                |       |
| Depreciation and  amortization                                                 |       | 109                                                 |       | 111                                                 |       |
| Gain on sale of  investments                                                   |       | (211                                                | )          | (1,631                                              | )          |
| Deferred income  tax expense related to bankruptcy                             |       | 93                                                  |       | 568                                                 |       |
| Changes in  operating assets and liabilities:                                  |       |                                                |       |                                                |       |
| Accounts  receivable                                                           |       | 10                                                  |       | (10                                                 | )          |
| Pawn service  charges receivable                                               |       | 25                                                  |       | (73                                                 | )          |
| Inventories, net                                                               |       | (447                                                | )          | (285                                                | )          |
| Prepaid expenses  and other current assets                                     |       | 17                                                  |       | 32                                                  |       |
| Accounts payable  and accrued liabilities                                      |       | (2                                                  | )          | 85                                                  |       |
| Net cash used in  operating activities                                         |       | (294                                                | )          | (184                                                | )          |
| Cash flows from  investing activities:                                         |       |                                                |       |                                                |       |
| Pawn loans made,  net                                                          |       | 228                                                 |       | (679                                                | )          |
| Proceeds from  sale of investments                                             |       | 1,393                                               |       | 5,400                                               |       |
| Purchase of  investments                                                       |       | (1,511                                              | )          | (2,131                                              | )          |
| Purchases of  property and equipment                                           |       | (118                                                | )          | (95                                                 | )          |
| Other assets                                                                   |       | —                                              |       | (55                                                 | )          |
| Net cash  provided by (used in) investing activities                           |       | (8                                                  | )          | 2,440                                               |       |
| Cash flows from  financing activities:                                         |       |                                                |       |                                                |       |
| Borrowings on  notes payable                                                   |       | 1,886                                               |       | 127                                                 |       |
| Principal  payments on notes payable                                           |       | (1,623                                              | )          | —                                              |       |
| Sale of common  stock                                                          |       | —                                              |       | 13                                                  |       |
| Purchase of  treasury stock                                                    |       | —                                              |       | (21                                                 | )          |
| Dividends paid                                                                 |       | (31                                                 | )          | (31                                                 | )          |
| Net cash  provided by financing activities                                     |       | 232                                                 |       | 88                                                  |       |
| Net increase  (decrease) in cash and cash equivalents                          |       | (70                                                 | )          | 2,344                                               |       |
| Cash and cash  equivalents at beginning of period                              |       | 206                                                 |       | 220                                                 |       |
| Cash and cash  equivalents at end of period                                    |       | $                                                   | 136        |                                                | $          | 2,564 |   |
| Supplemental  disclosures of cash flow information -                           |       |                                                |       |                                                |       |
| Cash paid for  interest                                                        |       | $                                                   | 130        |                                                | $          | 142 |   |

 

See accompanyingnotes to consolidated financial statements.

 

5

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**XPONENTIAL,INC. AND SUBSIDIARIES**

 

Notes to ConsolidatedFinancial Statements

(Unaudited)

 

(1)                      Basis ofPresentation

 

Theconsolidated financial statements include the accounts of Xponential, Inc. andits wholly-owned subsidiaries, Xponential Advisors, Inc. and PawnMart,Inc.  All significant intercompanytransactions have been eliminated.

 

Xponential,Inc., formerly PawnMart, Inc. (the “Company”), was incorporated in Delaware onJanuary 13, 1994.  EffectiveFebruary 28, 2003, the Company changed its name to “Xponential, Inc.” TheCompany’s wholly-owned subsidiary PawnMart, Inc. (“PawnMart”) is a specialtyfinance and retail enterprise principally engaged in establishing and operatingstores (“pawn shops”) which advance money secured by the pledge of tangiblepersonal property and buy and sell pre-owned merchandise.  As of September 30, 2004 PawnMart owned andoperated 26 stores located in Georgia and North Carolina.

 

Thefinancial statements as of September 30, 2004 and 2003 and for the three monthperiods then ended are unaudited but, in management’s opinion, include alladjustments necessary for a fair presentation of the results for such interimperiods.

 

Operatingresults for the three month periods are not necessarily indicative of theresults that may be expected for the full fiscal year.

 

Thefinancial statements should be read in conjunction with the financial statementsfor the fiscal year ended June 30, 2004 included in the Company’s Form 10-KSBwhich have been previously filed with the Securities and Exchange Commission.

 

(2)                      NotesPayable

 

*RevolvingCredit Facility-*

 

TheCompany and PawnMart obtained a new revolving credit facility on June 17, 2004from FCC, LLC, d/b/a First Capital, Kennesaw, Georgia (the “Lender”), in anamount up to $4,500,000 (which replaced in its entirety the $4,000,000 Comericaline of credit), which bears interest at the prevailing prime rate plus 2.00%(6.75% at September 30, 2004), and matures on June 17, 2007 (the “CreditFacility”).  The Credit Facility is anasset-based loan with advances thereunder based on PawnMart’s eligible accountsreceivable and inventory, subject to reserves and adjustments, including aspecific $1,000,000 reserve against the borrowing base.  The Credit Facility is collateralized bysubstantially all of the unencumbered assets of PawnMart and is guaranteed bythe Company.  In October 2004 the loanwas modified to eliminate the $1,000,000 reserve by the Company’s pledging ofadditional collateral in the form of marketable securities to the Lender in theamount of $1,000,000.  The Company isrequired to maintain certain financial ratios and comply with certain covenants,including a prohibition against paying cash dividends on its common stockunless specifically approved by the Lender. At September 30, 2004, $2,513,000 was outstanding under the CreditFacility pursuant to the available borrowing base and the Company was incompliance with the financial ratios and other covenants under the CreditFacility.

 

6

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(3)                      StockOption Plan and Incentive Plan

 

Effective January 1, 2003 the Company adopted the fairvalue method defined in SFAS No. 123, “Accounting for Stock-Based Compensation,”in accounting for the Company’s stock option plans.  Previously the Company applied AccountingPrinciples Board’s Opinion No. 25 (“APB No. 25”), “Accounting for Stock Issuedto Employees,” and related Interpretations. SFAS No. 123 indicates that the fair value method is the preferablemethod of accounting, and the Company has elected to apply it for all optionsgranted for the Company.  Under APB No.25, compensation costs related to stock options issued pursuant to compensatoryplans are measured based on the difference between the quoted market price ofthe stock at the measurement date (ordinarily the date of grant) and theexercise price and should be charged to expense over the periods during whichthe grantee performs the related services.

 

TheCompany adopted its 2003 Stock Option Plan (“Stock Option Plan”) effectiveJanuary 1, 2003.  Under the Stock OptionPlan, stock options have been awarded to directors, officers andemployees.  These stock options vesteither immediately or over a period of two years and expire ten yearsthereafter.  A total of 675,000 shares ofcommon stock are reserved for grant under the Stock Option Plan.  The Company has granted options covering atotal of 505,000 common shares under the Stock Option Plan, of which 349,000shares were immediately exercisable. Options covering a total of 249,000 shares have been exercised, optionscovering a total of 32,000 shares have been forfeited, leaving options coveringa total of 224,000 shares outstanding at September 30, 2004, with 184,000immediately exercisable.  The remainingoptions vest on June 30, 2005.  TheCompany recognized $400 and $1,200 of compensation expense for options grantedduring the three month periods ended September 30, 2004 and 2003, respectively.

 

Thefollowing table summarizes the stock option activity of the Company:

 
| ** **                         | ** ** | **Weighted Average**   | ** ** |
|------------------------------------|------------|------------------------|------------|
| ** **                         | ** ** | **Number of  Options** | ** ** | **Exercise  Price** | ** ** |
| Outstanding at  June 30, 2003      |       | 455,000                |       | $ | 1.00 |   |
| Granted                            |       | 30,000                 |       | 1.60 |   |
| Exercised                          |       | 249,000                |       | $ | 1.02 |   |
| Forfeited                          |       | 30,000                 |       | 1.00 |   |
| Outstanding at  June 30, 2004      |       | 206,000                |       | $ | 1.09 |   |
| Granted                            |       | 20,000                 |       | 1.56 |   |
| Exercised                          |       | —                 |       | — |   |
| Forfeited                          |       | 2,000                  |       | 1.00 |   |
| Outstanding at  September 30, 2004 |       | 224,000                |       | $ | 1.16 |   |
|                               |       |                   |       |   |   |
| Exercisable at  September 30, 2004 |       | 184,000                |       | $ | 1.13 |   |

 

TheCompany adopted its 2003 Stock Incentive Plan (“Incentive Plan”) effectiveJanuary 1, 2003.  A total of the greaterof 325,000 or the number of shares equal to 5% of the total number of shares ofCommon Stock outstanding are reserved for issuance under the IncentivePlan.  As of September 30, 2004, theCompany had awarded a total of 40,258 shares of restricted Common Stock underthe Incentive Plan.  Such grants were inlieu of salary and bonus deferrals by participants under the Incentive Plantotaling $69,088.

 

7

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(4)                      WeightedAverage Shares and Net Income Per Common Share

 

Netincome  per common share is calculated asrequired by FASB Statement of Financial Accounting Standards No. 128, “EarningsPer Share” (“Statement No. 128”). Statement No. 128 requires dual presentation of basic and dilutedearnings per share and a reconciliation between the two amounts.  Basic earnings per share excludes dilution,and diluted earnings per share reflects the potential dilution that would occurif securities for the purchase of Common Stock were exercised.  In loss periods, dilutive common equivalentshares are excluded as the effect would be antidilutive.

 

Thereconciliation of basic and diluted weighted average common shares and thereconciliation for the basic and diluted earnings per common share for thethree months ended September 30, 2004 and 2003 is as follows:

 
| **For the Three Months Ended  September 30, 2004** | ** ** | **Net Income  Allocable to  Common  Shareholders** | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------|------------|------------|------------|---------------|------------|
| Basic earnings  per common share                   |       | $                                                  | 81,000     |       | 2,344,206  |          | $          | 0.03 |   |
| Assuming  conversion -Series B preferred stock     |       | 31,000                                             |       | 1,720,130  |       |          |       |
| Diluted earnings  per common share                 |       | $                                                  | 112,000    |       | 4,064,336  |          | $          | 0.03 |   |

 
| **For the Three Months Ended  September 30, 2003** | ** ** | **Net Income  Allocable to  Common  Shareholders** | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------|------------|------------|------------|---------------|------------|
| Basic earnings  per common share                   |       | $                                                  | 988,000    |       | 2,079,948  |          | $          | 0.48 |   |
| Assuming  conversion -Series B preferred stock     |       | 31,000                                             |       | 1,720,130  |       |          |       |
| Diluted earnings  per common share                 |       | $                                                  | 1,019,000  |       | 3,800,078  |          | $          | 0.27 |   |

 

SeriesA Preferred Stock has been excluded from the computation of diluted earningsper share because the shares are not convertible into common shares and are notdilutive.  Accordingly, dividends paid toholders of Series A Preferred Stock in the amount of $67,000 during the threemonths ended September 30, 2004 and 2003 are included as interest expense inthe computation of diluted earnings per share.

 

Outstandingstock options for the purchase of 224,000 common shares have been excluded fromthe computation because those options are antidilutive.

 

(5)                      Investmentsin Marketable Securities

 

Marketableequity securities have been categorized as available-for-sale and carried atfair value.  Unrealized gains and lossesfor available-for-sale securities are included as a component of shareholders’equity net of tax until realized. Realized gains and losses on the sale of securities are based on thespecific identification method.  TheCompany continually reviews its investments to determine whether a decline infair value below the cost basis is other than temporary.  If the decline in the fair value is judged tobe other than temporary, the cost basis of the security is written down to fairvalue and the amount of the write-down is included in the consolidatedstatement of operations.

 

8

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As of September 30, 2004the Company owned the following marketable securities:

 
| **(in thousands)** | ** ** | **Cost** | ** ** | **Unrealized  Gain/(Loss)** | ** ** | **Market Value** | ** ** |
|--------------------|------------|----------|------------|-----------------------------|------------|------------------|------------|
|               |       |     |       |                        |       |             |       |
| Stocks             |       | $        | 7          |                        | $          | (6               | )          | $ | 1 |   |
| Bonds              |       | 1,650    |       | 71                          |       | 1,721            |       |
|               |       |     |       |                        |       |             |       |
| Total              |       | $        | 1,657      |                        | $          | 65               |       | $ | 1,722 |   |

 

As of June 30 2004 theCompany owned the following marketable securities:

 
| **(in thousands)** | ** ** | **Cost** | ** ** | **Unrealized  Gain/(Loss)** | ** ** | **Market Value** | ** ** |
|--------------------|------------|----------|------------|-----------------------------|------------|------------------|------------|
|               |       |     |       |                        |       |             |       |
| Stocks             |       | $        | 7          |                        | $          | (6               | )          | $ | 1 |   |
| Bonds              |       | 2,729    |       | 287                         |       | 3,016            |       |
|               |       |     |       |                        |       |             |       |
| Total              |       | $        | 2,736      |                        | $          | 281              |       | $ | 3,017 |   |

 

(6)                      ComprehensiveIncome

 

Comprehensive income isas follows:

 
| **(in thousands)**                                         | ** ** | **For the Three Month Period Ended  September 30, 2004** | ** ** | **For the Three Month  Period Ended  September 30, 2003** | ** ** |
|------------------------------------------------------------|------------|----------------------------------------------------------|------------|-----------------------------------------------------------|------------|
|                                                       |       |                                                     |       |                                                      |       |
| Net income                                                 |       | $                                                        | 112        |                                                      | $          | 1,019 |   |
| Unrealized gain  from available for sale securities        |       | (31                                                      | )          | 134                                                       |       |
| Reclassification  of realized gains included in net income |       | (110                                                     | )          | (1,631                                                    | )          |
|                                                       |       |                                                     |       |                                                      |       |
| Comprehensive  income (loss)                               |       | $                                                        | (29        | )                                                         | $          | (478 | ) |

 

(7)                      Investmentin American IronHorse Motorcycle Company, Inc.

 

TheCompany has invested $4,428,000 in American IronHorse Motorcycle Company, Inc.(“American IronHorse”) as of September 30, 2004.  The Company owns 13.9% of the common stock ofAmerican IronHorse and accounts for this investment as a non-current asset onthe cost method.**** $600,000 of the investment is financed by athird party seller with a promissory note at 5% interest per annum requiringmonthly payments of principal and interest of $21,372 for 36 months which beganAugust 25, 2004 and is included as a liability at September 30, 2004 of$562,000.  It is possible the Company mayincrease its investment in American IronHorse which could result in therequirement to use the equity method of accounting.

 

9

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Following issummary unaudited financial information for American IronHorse as of September30, 2004 and December 31, 2003:

 
| **(in thousands)**         | ** ** | **As of  September 30, 2004** | ** ** | **As of  December 31, 2003** | ** ** |
|----------------------------|------------|-------------------------------|------------|------------------------------|------------|
| ** **                 | ** ** | **(Unaudited)**               | ** ** | **(Unaudited)**              | ** ** |
|                       |       |                          |       |                         |       |
| Current assets             |       | $                             | 27,635     |                         | $          | 23,892 |   |
| Current  liabilities       |       | 17,490                        |       | 19,901                       |       |
| ** **                 | ** ** | ** **                    | ** ** | ** **                   | ** ** |
| Total assets               |       | $                             | 32,318     |                         | $          | 29,042 |   |
| Total  liabilities         |       | 21,097                        |       | 24,589                       |       |
| Stockholders’  equity |       | $                             | 11,221     |                         | $          | 4,453 |   |

 
| **(in thousands)** | ** ** | **For the  Nine Months Ended  September 30, 2004** | ** ** | **For the  Year Ended  December 31, 2003** | ** ** |
|--------------------|------------|----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **         | ** ** | **(Unaudited)**                                    | ** ** | **(Unaudited)**                            | ** ** |
|               |       |                                               |       |                                       |       |
| Total revenue      |       | $                                                  | 58,050     |                                       | $          | 65,019 |   |
| Net income  (loss) |       | $                                                  | 544        |                                       | $          | (191 | ) |

 

(8)                      OperatingSegment Information

 

The Company has two reportable business segments; onein the pawn lending industry and one for its investment, management andadvisory services.  PawnMart, Inc.operates 26 pawn shops in Georgia and North Carolina.  Xponential Advisors, Inc. provides managementand advisory services to American IronHorse and directs the investment of theCompany’s available funds in marketable securities and other investmentopportunities.

 

Operating segment data for the three months endedSeptember 30, 2004 and 2003 is set forth below (in thousands):

 

10

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| **Three Months Ended September  30, 2004**   | ** ** | **Pawn  Lending** | ** ** | **Investment,  Management and  Advisory Services** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------|------------|-------------------|------------|----------------------------------------------------|------------|------------------|------------|
| **Revenue:**                                 |       |              |       |                                               |       |             |       |
| Merchandise  sales                           |       | $                 | 3,032      |                                               | $          | —           |       | $ | 3,032 |   |
| Pawn service  charges and related fee income |       | 1,571             |       | —                                             |       | 1,571            |       |
| Management  advisory and related fee income  |       | —            |       | 42                                                 |       | 42               |       |
| **Total  Revenue**                           |       | 4,603             |       | 42                                                 |       | 4,645            |       |
| **Expenses:**                                |       |              |       |                                               |       |             |       |
| Cost of sales                                |       | 2,330             |       | —                                             |       | 2,330            |       |
| Store operating  expenses                    |       | 1,421             |       | —                                             |       | 1,421            |       |
| Corporate  administrative expenses           |       | 423               |       | 259                                                |       | 682              |       |
| Depreciation and  amortization               |       | 109               |       | —                                             |       | 109              |       |
| **Operating  income (loss)**                 |       | 311               |       | (208                                               | )          | 103              |       |
|                                         |       |              |       |                                               |       |             |       |
| Interest and  dividend income                |       | 1                 |       | 40                                                 |       | 41               |       |
| Interest expense                             |       | (72               | )          | (78                                                | )          | (150             | )          |
| Gain on sale of  marketable securities       |       | —            |       | 211                                                |       | 211              |       |
| **Net  income before taxes**                 |       | $                 | 249        |                                               | $          | (44              | )          | $ | 205 |   |
|                                         |       |              |       |                                               |       |             |       |
| **Total  Assets**                            |       | $                 | 9,443      |                                               | $          | 6,333            |       | $ | 15,776 |   |

 
| **Three Months Ended September  30, 2003**   | ** ** | **Pawn  Lending** | ** ** | **Investment,  Management and Advisory Services** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------|------------|-------------------|------------|---------------------------------------------------|------------|------------------|------------|
| **Revenue:**                                 |       |              |       |                                              |       |             |       |
| Merchandise  sales                           |       | $                 | 3,321      |                                              | $          | —           |       | $ | 3,321 |   |
| Pawn service  charges and related fee income |       | 1,654             |       | —                                            |       | 1,654            |       |
| Management  advisory and related fee income  |       | —            |       | 9                                                 |       | 9                |       |
| **Total  Revenue**                           |       | 4,975             |       | 9                                                 |       | 4,984            |       |
|                                         |       |              |       |                                              |       |             |       |
| **Expenses:**                                |       |              |       |                                              |       |             |       |
| Cost of sales                                |       | 2,682             |       | —                                            |       | 2,682            |       |
| Store operating  expenses                    |       | 1,518             |       | —                                            |       | 1,518            |       |
| Corporate  administrative expenses           |       | 427               |       | 214                                               |       | 641              |       |
| Depreciation and  amortization               |       | 109               |       | 2                                                 |       | 111              |       |
| **Operating  income (loss)**                 |       | 239               |       | (207                                              | )          | 32               |       |
|                                         |       |              |       |                                              |       |             |       |
| Interest and  dividend income                |       | —            |       | 100                                               |       | 100              |       |
| Interest expense                             |       | (85               | )          | (76                                               | )          | (161             | )          |
| Gain on  disposition of assets               |       | 3                 |       | —                                            |       | 3                |       |
| Gain on sale of  marketable securities       |       | —            |       | 1,631                                             |       | 1,634            |       |
| **Net income  before taxes**                 |       | $                 | 157        |                                              | $          | 1,448            |       | $ | 1,605 |   |
|                                         |       |              |       |                                              |       |             |       |
| **Total  Assets**                            |       | $                 | 10,006     |                                              | $          | 7,275            |       | $ | 17,281 |   |

 

11

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**ITEM 2.****                             MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

 

### *Statements appearing in the following discussion thatare not historical facts are forward-looking statements (“forward-lookingstatements”) within the meaning of Section 27A of the Securities Act of 1933,as amended, and Section 21E of the Securities Exchange Act of 1934, as amended,which are intended to be covered by the safe harbors created by thosesections.  Such forward-lookingstatements are necessarily estimates reflecting the best judgment of theCompany’s management based upon current information and involve known andunknown risks, uncertainties and other factors which may cause the actualresults, performance or achievements of the Company, or industry results, to bematerially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors,include, but are not limited to, those set forth and those appearing from timeto time in filings made by the Company with the Securities and ExchangeCommission.  These risks, uncertaintiesand other factors should not be construed as exhaustive and the Company doesnot undertake, and specifically disclaims any obligation, to update anyforward-looking statements to reflect occurrences or unanticipated events orcircumstances after the date of such statements.*

### * *

*Inaddition, the following discussion and analysis should be read in conjunctionwith the Company’s financial statements and notes thereto and other financialdata included in the Company’s Form 10-KSB for the fiscal year ended June 30,2004.*

 

GENERAL

 

Xponential, Inc. (the “Company”) is diversifiedholding company.  Its wholly ownedsubsidiary, PawnMart, Inc. (“PawnMart”), is a specialty finance and retailbusiness principally engaged in establishing and operating pawn shops which advancemoney secured by the pledge of tangible personal property and sell pre-ownedmerchandise to value-conscious consumers. PawnMart generates income through collection of a monthly service chargefrom advancing money to individuals based primarily upon the estimated resalevalue of pledged personal property such as jewelry, consumer electronics,tools, musical instruments, automobiles and other miscellaneous items andthrough profit realized on the retail sale of the unredeemed or other purchasedpre-owned merchandise.

 

The Company also has invested in American IronHorseMotorcycle Company, Inc. (“American IronHorse”), a Texas corporation thatmanufactures specialty motorcycles.  AtSeptember 30, 2004 the Company and its wholly-owned subsidiary, XponentialAdvisors, Inc., collectively owned 730,748 shares (exclusive of warrants topurchase 100,000 shares of common stock of American IronHorse), or 13.9% of theoutstanding common stock of American IronHorse (which would be reduced to 10.7%assuming conversion and exercise of all outstanding convertible securities).

 

At September 30, 2004, directors and officers of theCompany, directly and through affiliates, collectively owned an additional1,253,753 shares (exclusive of warrants to purchase 228,707 shares and optionsto purchase 29,166 shares of common stock of American IronHorse), or 23.8%, ofthe outstanding common stock of American IronHorse (which would be reduced to19.4% assuming conversion and exercise of all outstanding convertiblesecurities).  These include shares andconvertible securities owned by Carroll Dawson, Dwayne Moyers, InvestorsStrategic Partners I, Ltd., Motorcycle Investments, L.L.C., and Sanders MorrisHarris Group Inc.  Mr. Moyers is also adirector of American IronHorse.

 

The Company also provides management advisory servicesin conjunction with financing and investments provided to other companies.  In connection with financing provided toAmerican IronHorse, Xponential Advisors, Inc. is paid a management fee oftwenty-five (25) shares of common stock of American IronHorse for each hourworked by Robert W. Schleizer up to a maximum of 24 hours per week.

 

The Company’s total revenues are derived primarilyfrom service charges on loans and the proceeds from the sales of merchandise inventory.  The Company’s pawn loans are generally madeon the pledge of tangible personal property for one month, with an automaticextension periods based on statutory requirements.  All pawn loans are collateralized by tangiblepersonal property placed in the possession of the Company, except forautomobile title loans.  During the termof an automobile title loan, the borrower is allowed to maintain possession ofthe collateral.  Pawn service charges arerecognized when loans are repaid or renewed. If a loan is not repaid, the principal amount advanced on the loan,exclusive of any uncollected pawn service charges, becomes the carrying valueof the forfeited collateral (inventory), which is recovered through subsequentsales.

 

12

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Selected elements of theCompany’s unaudited statements of operations are shown below for the threemonths ended September 30, 2004 and September 30, 2003 as a percentage of totalrevenues.  The following table, as wellas the discussion following, should be read in conjunction with the Company’sfinancial statements and notes thereto and other financial data included in theCompany’s Form 10-KSB for the fiscal year ended June 30, 2004.

 
| ** **                                       | ** ** | **For the  Three Months Ended  September 30, 2004** | ** ** | **For the  Three Months Ended  September 30, 2003** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
|                                             |       |                                                |       |                                                |       |
| Merchandise  sales                               |       | 65.3                                                | %          | 66.6                                                | %          |
| Pawn service  charges and related fee income     |       | 33.8                                                |       | 33.2                                                |       |
| Management  advisory fees and related fee income |       | 0.9                                                 |       | 0.2                                                 |       |
| Total revenues                                   |       | 100.0                                               |       | 100.0                                               |       |
| Cost of sales                                    |       | 50.2                                                |       | 53.8                                                |       |
| Store operating  expenses                        |       | 30.6                                                |       | 30.5                                                |       |
| Corporate  administrative expenses               |       | 14.6                                                |       | 12.9                                                |       |
| Depreciation and  amortization                   |       | 2.4                                                 |       | 2.3                                                 |       |
| Operating income                                 |       | 2.2                                                 |       | 0.6                                                 |       |
| Interest and  dividend income                    |       | 1.0                                                 |       | 2.0                                                 |       |
| Interest expense                                 |       | 3.2                                                 |       | 3.2                                                 |       |
| Gain on sale of  marketable securities           |       | 4.4                                                 |       | 32.9                                                |       |
| Net income  before income taxes                  |       | 4.4                                                 | %          | 32.3                                                | %          |
| Income tax provision                             |       | 2.0                                                 |       | 11.8                                                |       |
| Net income  before income taxes                  |       | 2.4                                                 | %          | 20.5                                                | %          |

 

**RESULTS OF OPERATIONS**

** **

*Three Months EndedSeptember 30, 2004 Compared to Three Months Ended September 30, 2003*

* *

Total revenues decreased 6.8% to $4,645,000 during thethree months ended September 30, 2004 (the “Three Month 2005 Period”) ascompared to $4,984,000 during the three months ended September 30, 2003 (the “ThreeMonth 2004 Period”).  The overalldecrease was attributable primarily to decreases in pawn service charges on carloans and decreased merchandise sales. Stores that remained open for the full 12 months or more as ofSeptember 30, 2004 (the “Comparable Stores”) experienced a net decrease inrevenues of $309,000, or 6.8%.

 

Merchandise salesdecreased 8.7% to $3,032,000 during the Three Month 2005 Period from $3,321,000during the Three Month 2004 Period primarily due to decreased jewelry scrapsales.  Sales in Comparable Stores forthe Three Month 2005 Period decreased $123,000, or 4.4%.

 

Pawn service chargesdecreased $83,000 or 5.0% to $1,571,000 during the Three Month 2005 Period from$1,654,000 during the Three Month 2004 Period primarily due to decreased pawnservice charges on car loans which decreased to $396,000 during the Three Month2005 Period compared to $468,000 during the Three Month 2004 Period due to achange in advance rates on car title loans. Pawn service charges from Comparable Stores decreased $64,000 or 4.0%for the Three Month 2005 Period as compared to the Three Month 2004 Period.

 

Gross profit increased 0.6% to $2,315,000 during theThree Month 2005 Period from $2,302,000 during the Three Month 2004 Periodprimarily due to reduced losses on sales of repossessed cars resulting fromdefaulted car loans.  Gross profit forComparable Stores increased $68,000 for the Three Month 2005 Period as comparedto the Three Month 2004 Period, a 3.1% increase.  Gross profit as a percentage of total revenuesincreased to 49.8% during the Three Month 2005 Period as compared to 46.2%during the Three Month 2004 Period primarily as a result of higher margins onmerchandise sales due to less aggressive lending practices.

 

Store operating expenses decreased to $1,421,000 forthe Three Month 2005 Period from $1,518,000 during the Three Month 2004 Periodprimarily due to decreased personnel expenses for  car title and compliance personnel.  On a Comparable Store basis, store operatingexpenses were 30.3% of total revenues during the Three Month 2005 Periodcompared to 33.0% of total revenues during the Three Month 2004 Period.

 

13

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Corporate administrativeexpenses increased 6.4% to $682,000 during the Three Month 2005 Period from$641,000 during the Three Month 2004 Period primarily due to costs related tolegal and professional fees related to registering of the Company’s commonstock for trading on the OTC Bulletin Board. Corporate administrative expenses increased to 14.6% of total revenuesduring the Three Month 2005 Period as compared to 12.9% during the Three Month2004 Period.

 

Interest expensedecreased $11,000 from $161,000 during the Three Month 2005 Period as comparedto the Three Month 2004 Period primarily due to the reduction in the bank lineof credit.

 

Interest and dividendincome for the Three Month 2005 Period decreased 59.0% due primarily to a$1,410,000 increase in its investment in common stock of American IronHorsewith funds that had been previously invested in marketable securities thatprovided interest and dividend income to the Company in the Three Month 2004Period.

 

The Company alsorecognized a gain of $211,000 on the sale of securities during the Three Month2005 Period compared to a gain of $1,631,000 in the Three Month 2004 Period.

 

The Company recognizedincome tax expense of $93,000 and $586,000 during the Three Month 2005 Periodand Three Month 2004 Period, respectively, of which $93,000 and $568,000 is theresult of the utilization of net operating loss carryforwards not previouslyrecognized upon the emergence from bankruptcy and is offset with acorresponding increase to paid in capital and, therefore, has no effect on theCompany’s cash flows.

 

**LIQUIDITY AND CAPITAL RESOURCES**

** **

The Company’s operations and growth have been financedwith working capital, bank borrowings and funds generated from operations.

 

The Company’s current credit facility with a financecompany in the amount of $4,500,000 matures on June 17, 2007 and bears interestat the prevailing prime rate plus 2.0% (the “Credit Facility”).  Under the terms of the Credit Facility, theCompany is required to maintain certain financial ratios and comply withcertain technical covenants.  The Companywas in compliance with the requirements and covenants as of September 30,2004.  During the Three Month 2005 Periodthe Company paid fees associated with the Credit Facility totaling $18,000.

 

As of September 30, 2004 the Company’s sources ofliquidity were $136,000 in cash and cash equivalents, $1,722,000 in marketablesecurities, $63,000 in trade accounts receivable, $464,000 in pawn servicecharges receivable, $4,221,000 in pawn loan receivables and $3,415,000 ininventories.

 

The Company’s profitability and liquidity is affectedby the amount of loans outstanding, which is controlled in part by the Company’slending decisions.  The Company is ableto influence the frequency of forfeiture of collateral by increasing ordecreasing the amount loaned in relation to the sales value of the pledgedproperty.  Tighter credit decisionsgenerally result in smaller loans in relation to the estimated sales value ofthe pledged property and can thereby decrease the Company’s aggregate loanbalance and, consequently, decrease pawn service charges.  Additionally, lower loans in relation to thepledged property’s estimated sales value tend to slightly increase loanredemptions and improve the Company’s liquidity.  Conversely, providing higher loans inrelation to the estimated sales value of the pledged property can result in anincrease in the Company’s pawn service charge income.  Higher average loan balances can also resultin a slight increase in loan forfeitures, which increases the quantity of goodson hand and, unless the Company increases inventory turnover, reduces theCompany’s liquidity.

 

The Company believes it has sufficient working capitalto fund its current operations for Fiscal 2005 and to expand through theacquisition of new stores and other businesses. The Company’s ability to expand through the acquisition of new storesand other businesses will be dependent on its ability to have sufficientavailability under its Credit Facility.

 

The Series A Preferred Stock must be redeemed for cashat $5.00 per share by the Company beginning April 30, 2005 in amounts of atleast $500,000 per year.  Each April 30thereafter through 2009 an additional 100,000 shares must be redeemed for cashat $5.00 per share.  On April 30, 2010any unredeemed shares must be redeemed for cash at $5.00 per share plus anyaccrued and unpaid dividends.

 

14

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**ITEM 3.****                             CONTROLSAND PROCEDURES**

 

Underthe supervision of, and with the participation of management, including theChief Executive Officer and Chief Financial Officer, the Company has evaluatedits disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))as of the end of the period covered by this report as required by Rules 13a-15(b)and 15d-15(b) of the Exchange Act. Based on this evaluation, the Company hasconcluded that its disclosure controls and procedures were operatingeffectively as designed. As required, the Company will continue to evaluate theeffectiveness of these controls and procedures on a quarterly basis.

 

Therewere no changes in the Company’s internal controls over financial reporting (asdefined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during itsmost recently completed fiscal quarter that have materially affected, or arereasonably likely to materially affect, the Company’s internal controls overfinancial reporting.

 

15

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**PART II**

 

**ITEM5.****                             OTHERINFORMATION**

 

OnAugust 6, 2004 the Company issued a press release announcing that the NationalAssociation of Securities Dealers, Inc. had declared effective the Company’sapplication to commence trading on the OTC Bulletin Board under the symbol “XPOI.”  There have been only two trades of theCompany’s common stock:  onSeptember 24, 2004 for 26,000 shares at $1.25 per share and on November 9,2004 for 6,190 shares at $1.50 per share. Due to nominal trading volume in the Company’s stock, the price at whichthese shares traded may not reflect the market value of the Company’s CommonStock.

 

**ITEM6.****                             EXHIBITS**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1       |       | First Amendment to Loan  and Security Agreement between PawnMart, Inc., as borrower, Xponential, Inc.,  as parent, and FCC, LLC, as lender, dated October 8, 2004; Letter agreement  amendment to Section 2(f) of Loan and Security Agreement dated October 5,  2004; and Account Control Agreement between Xponential, Inc., as debtor, FCC,  LLC, as lender, and Wachovia Securities, as broker, dated October 14, 2004 * |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 31.1       |       | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the  Securities Exchange Act of 1934, as amended *                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.2       |       | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the  Securities Exchange Act of 1934, as amended *                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 32.1       |       | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 32.2       |       | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                       |

 

----

*                                         Filedherewith.

 

16

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**SIGNATURES**

 

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

 
|              | XPONENTIAL, INC. (Registrant) |
|-------------------|-------------------------------|
|              |                          |
|              |                          |
| November 15, 2004 | By:                           | /s/ Robert W. Schleizer |   |
|              |                          | Robert W. Schleizer, Executive Vice  President and Chief Financial Officer |

 

17

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**EXHIBIT INDEX**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.1       |       | First Amendment to Loan  and Security Agreement between PawnMart, Inc., as borrower, Xponential, Inc.,  as parent, and FCC, LLC, as lender, dated October 8, 2004; Letter agreement  amendment to Section 2(f) of Loan and Security Agreement dated October 5,  2004; and Account Control Agreement between Xponential, Inc., as debtor, FCC,  LLC, as lender, and Wachovia Securities, as broker, dated October 14, 2004 |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.1       |       | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the  Securities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.2       |       | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities  Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.1       |       | Certification of Chief  Executive Officer pursuant to Rule 13a-14(b) or 15d-14(b) under the  Securities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.2       |       | Certification of Chief  Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) under the  Securities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                  |

 

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