##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 for the quarterly period ended March 31, 2007.
 o
    
    TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 for the transition period from  to .
 Commission File No. 1-13919
 Xponential, Inc.
  Delaware
    
    75-2520896(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 6400 Atlantic Boulevard, Suite 190, Norcross, Georgia 30071
 (678) 720-0660
 þ o
 o þ
 þ o
  o þ




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##### 



XPONENTIAL, INC.
 INDEX
  
 PagePART I    FINANCIAL INFORMATION
    
    
    3Item 1Condensed Consolidated Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2007 and June 30, 2006
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended March 31, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2Managements Discussion and Analysis or Plan of Operation
    
    
    19Item 3Controls and Procedures
    
    
    25PART II    OTHER INFORMATION
    
    
    26Item 4Submission of Matters to a Vote of Security Holders
    
    
    26Item 6Exhibits
    
    
    26Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive OfficerCertification of Chief Financial Officer
  2




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##### Table of Contents



PART I    FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 XPONENTIAL, INC. AND SUBSIDIARIES
 March 31,
    
    
    June 30,2007
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    403
    
    
    $
    1,932Investments-marketable securities
    
    
    6,377
    
    
    
    8,741Accounts and short term notes receivable
    
    
    509
    
    
    
    1,499Pawn service charges receivable
    
    
    429
    
    
    
    524Pawn loans receivable
    
    
    3,901
    
    
    
    4,763Inventories, net
    
    
    4,470
    
    
    
    5,242Prepaid expenses and other current assets
    
    
    242
    
    
    
    171Total current assets
    
    
    16,331
    
    
    
    22,872Property and equipment, net
    
    
    3,042
    
    
    
    2,464Notes receivable  American IronHorse Motorcycle Company, Inc. (Note 10)
    
    
    900
    
    
    
    Investment in American IronHorse Motorcycle Company, Inc. (Note 10)
    
    
    413
    
    
    
    6,451Investment in Integrity Mutual Funds, Inc. (Note 11)
    
    
    3,839
    
    
    
    586Note issuance costs, net of amortization of $331 and $179 as of March 31, 2007 and June 30, 2006,
respectively
    
    
    1,561
    
    
    
    1,713Other assets, net of amortization of $127 and $86 as of March 31, 2007 and June 30, 2006, respectively
    
    
    132
    
    
    
    157Total assets
    
    $
    26,218
    
    
    $
    34,243Liabilities and Stockholders Equity (Deficit)Current liabilities:Bank line of credit
    
    $
    209
    
    
    $
    1,880Current maturities of notes payable
    
    
    386
    
    
    
    577Accounts payable and accrued expenses
    
    
    481
    
    
    
    495Accrued payroll and payroll taxes
    
    
    285
    
    
    
    150Deferred revenues
    
    
    230
    
    
    
    152Accrued interest
    
    
    11
    
    
    
    132Redeemable preferred stock  Series A
    
    
    500
    
    
    
    500Total current liabilities
    
    
    2,102
    
    
    
    3,886Long term notes payable:8% limited recourse convertible notes, net of discount of $107 and $111 at March 31, 2007 and
June 30, 2006, respectively
    
    
    19,893
    
    
    
    19,889Other long term notes payable
    
    
    917
    
    
    
    1,191Total long term notes payable
    
    
    20,810
    
    
    
    21,080Commitments and contingenciesRedeemable preferred stock  Series A; par value $0.01; 5% cumulative dividend, liquidation preference
$5.00 per share; 871,630 shares issued at March 31, 2007 and June 30, 2006, respectively
    
    
    3,858
    
    
    
    3,858Total long term liabilities
    
    
    24,668
    
    
    
    24,938Total liabilities
    
    
    26,770
    
    
    
    28,824Stockholders equity (deficit):Preferred stock  Series B; par value $0.01; 5% cumulative dividend, liquidation preference $5.00 per
share ($2,500,210); 500,042 shares issued at March 31, 2007 and June 30, 2006, respectively
    
    
    5
    
    
    
    5Common stock  $0.01 par value; 10,000,000 shares authorized, 2,553,335 and 2,491,014 shares issued
as of
March 31, 2007 and June 30, 2006, respectively
    
    
    26
    
    
    
    25Additional paid-in capital
    
    
    6,111
    
    
    
    5,959Accumulated deficit
    
    
    (7,395
    )
    
    
    (258
    )Accumulated other comprehensive income (loss)
    
    
    741
    
    
    
    (272
    )Treasury stock, at cost; 25,000 common shares
    
    
    (40
    )
    
    
    (40
    )Total stockholders equity (deficit)
    
    
    (552
    )
    
    
    5,419Total liabilities and stockholders equity (deficit)
    
    $
    26,218
    
    
    $
    34,243
  3




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Revenues:Merchandise sales
    
    $
    3,278
    
    
    $
    3,664Pawn service charges and related fee income
    
    
    1,526
    
    
    
    1,499Other
    
    
    3
    
    
    
    Total revenues
    
    
    4,807
    
    
    
    5,163Cost of sales
    
    
    2,508
    
    
    
    2,431Gross profit
    
    
    2,299
    
    
    
    2,732Expenses:Store operating expenses
    
    
    1,619
    
    
    
    1,591Corporate administrative expenses
    
    
    782
    
    
    
    742Depreciation and amortization
    
    
    81
    
    
    
    93Total expenses
    
    
    2,482
    
    
    
    2,426Operating income (loss)
    
    
    (183
    )
    
    
    306Interest and dividend income
    
    
    229
    
    
    
    200Interest expense including Series A preferred dividends of $54 and $61 for the three
months ended March 31, 2007 and 2006, respectively
    
    
    (579
    )
    
    
    (520
    )Gain (loss) on futures contracts
    
    
    2
    
    
    
    (463
    )Gain on sale of marketable investments
    
    
    
    
    
    
    38Loss from American IronHorse Motorcycle Company, Inc. (Note 10)
    
    
    (476
    )
    
    
    Loss before taxes and impairment
    
    
    (1,007
    )
    
    
    (439
    )Income tax expense
    
    
    2
    
    
    
    68Loss before impairment
    
    
    (1,009
    )
    
    
    (507
    )Loss due to impairment of investment in American IronHorse Motorcycle Company, Inc.
    
    
    (832
    )
    
    
    Net loss
    
    
    (1,841
    )
    
    
    (507
    )Series B preferred stock dividend requirement
    
    
    (32
    )
    
    
    (31
    )Net loss allocable to common stockholders
    
    $
    (1,873
    )
    
    $
    (538
    )Net loss per common share (Note 6):Basic and Diluted Loss before impairment
    
    $
    (0.40
    )
    
    $
    (0.22
    )Impairment loss
    
    
    (0.33
    )
    
    
    Net loss per common share
    
    $
    (0.73
    )
    
    $
    (0.22
    )
  4




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
  Nine Months Ended
    
    
    Nine Months EndedMarch 31, 2007
    
    
    March 31, 2006Revenues:Merchandise sales
    
    $
    10,496
    
    
    $
    11,513Pawn service charges and related fee income
    
    
    4,721
    
    
    
    4,634Other
    
    
    25
    
    
    
    30Total revenues
    
    
    15,242
    
    
    
    16,177Cost of sales
    
    
    8,035
    
    
    
    8,271Gross profit
    
    
    7,207
    
    
    
    7,906Expenses:Store operating expenses
    
    
    4,733
    
    
    
    4,666Corporate administrative expenses
    
    
    2,284
    
    
    
    2,142Depreciation and amortization
    
    
    248
    
    
    
    291Total expenses
    
    
    7,265
    
    
    
    7,099Operating income (loss)
    
    
    (58
    )
    
    
    807Interest and dividend income
    
    
    712
    
    
    
    478Interest expense including Series A preferred dividends of $163 and $182
for the nine months ended March 31, 2007 and 2006, respectively
    
    
    (1,825
    )
    
    
    (1,288
    )Gain (loss) on futures contracts
    
    
    19
    
    
    
    (936
    )Gain on sale of marketable investments
    
    
    150
    
    
    
    219Loss from American IronHorse Motorcycle Company, Inc.
    
    
    (1,544
    )
    
    
    Loss before taxes, impairment and cumulative effect of change in accounting
principle
    
    
    (2,546
    )
    
    
    (720
    )Income tax expense
    
    
    2
    
    
    
    14Loss before impairment and cumulative effect of change in accounting principle
    
    
    (2,548
    )
    
    
    (734
    )Loss due to impairment of investment in American IronHorse Motorcycle Company, Inc.
(Note 10)
    
    
    (4,056
    )
    
    
    Cumulative effect of change in accounting principle (Note 10)
    
    
    (438
    )
    
    
    Net loss
    
    
    (7,042
    )
    
    
    (734
    )Series B preferred stock dividend requirement
    
    
    (94
    )
    
    
    (94
    )Net loss allocable to common stockholders
    
    $
    (7,136
    )
    
    $
    (828
    )Net loss per common share (Note 6):Basic and Diluted Loss before cumulative effect of change in accounting principle
    
    $
    (1.05
    )
    
    $
    (0.34
    )Impairment loss
    
    
    (1.60
    )
    
    
    Cumulative effect of change in accounting principle
    
    
    (0.17
    )
    
    
    Net loss per common share
    
    $
    (2.82
    )
    
    $
    (0.34
    )
  5




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XPONENTIAL, INC. AND SUBSIDIARIES
 
 
  For the
    
    
    For theNine Months Ended
    
    
    Nine Months EndedMarch 31, 2007
    
    
    March 31, 2006Cash flows from operating activities:Net loss
    
    $
    (7,042
    )
    
    $
    (734
    )Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:Impairment loss
    
    
    4,056
    
    
    
    Cumulative effect of change in accounting principle
    
    
    438
    
    
    
    Depreciation and amortization
    
    
    248
    
    
    
    292Compensation expense
    
    
    51
    
    
    
    64Gain on sale of marketable investments
    
    
    (150
    )
    
    
    (219
    )Non cash loss from American IronHorse Motorcycle Company, Inc.
    
    
    1,544
    
    
    
    Interest expense  bond discount and debt issuance costs
    
    
    194
    
    
    
    152Changes in operating assets and liabilities:Amortization of debt issuance costsAccounts receivable
    
    
    90
    
    
    
    (353
    )Pawn service charges receivable
    
    
    95
    
    
    
    147Inventories, net
    
    
    772
    
    
    
    (1,092
    )Prepaid expenses and other current assets
    
    
    (87
    )
    
    
    28Accounts payable and accrued liabilities
    
    
    78
    
    
    
    (181
    )Net cash provided by (used in) operating activities
    
    
    287
    
    
    
    (1,896
    )Cash flows from investing activities:Pawn loans made
    
    
    (10,940
    )
    
    
    (12,153
    )Pawn loans redeemed
    
    
    5,379
    
    
    
    5,411Inventories acquired from loan forfeitures
    
    
    6,423
    
    
    
    8,084Proceeds from sale of marketable investments
    
    
    3,514
    
    
    
    2,178Purchase of marketable investments
    
    
    (2,290
    )
    
    
    (9,363
    )Purchase of notes receivable (Note 11)
    
    
    (950
    )
    
    
    Purchases of property and equipment
    
    
    (811
    )
    
    
    (1,743
    )Other assets
    
    
    
    
    
    
    (32
    )Net cash provided by (used in) investing activities
    
    
    325
    
    
    
    (7,618
    )Cash flows from financing activities:Borrowings on notes payable
    
    
    10,926
    
    
    
    13,943Principal payments on notes payable
    
    
    (13,062
    )
    
    
    (13,208
    )Convertible note offering proceeds
    
    
    
    
    
    
    10,456Convertible note offering costs
    
    
    (1
    )
    
    
    (953
    )Proceeds from issuance of common stock
    
    
    90
    
    
    
    186Dividends paid
    
    
    (94
    )
    
    
    (94
    )Net cash provided by (used in) financing activities
    
    
    (2,141
    )
    
    
    10,330Net increase (decrease) in cash and cash equivalents
    
    
    (1,529
    )
    
    
    816Cash and cash equivalents at beginning of period
    
    
    1,932
    
    
    
    407Cash and cash equivalents at end of period
    
    $
    403
    
    
    $
    1,223Supplemental disclosures of cash flow information Cash paid for interest
    
    $
    1,620
    
    
    $
    1,288
  6




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 
 (1)
    
    Basis of Presentation
      (2)
    
    Recent Accounting Pronouncements
    7




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (3)
    
    Notes Payable
 Revolving Credit Facility-
  8% Limited Recourse Convertible Notes-
  (4)
    
    Equity
  8




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XPONENTIAL, INC. AND SUBSIDIARIES
 
 (5)
    
    Stock Option Plan, Stock Incentive Plan and Stock Purchase Plan
   Weighted AverageNumber of
    
    
    ExerciseOptions
    
    
    PriceOutstanding at June 30, 2004
    
    
    206,000
    
    
    $
    1.09Granted
    
    
    20,000
    
    
    
    1.56Exercised
    
    
    (2,000
    )
    
    
    1.00Forfeited
    
    
    (4,000
    )
    
    
    1.00Outstanding and exercisable at June 30, 2005
    
    
    220,000
    
    
    
    1.13Granted
    
    
    40,000
    
    
    
    2.90Exercised
    
    
    (40,000
    )
    
    
    1.00Forfeited
    
    
    
    
    
    
    Outstanding and exercisable at June 30, 2006
    
    
    220,000
    
    
    
    1.48Granted
    
    
    40,000
    
    
    
    1.65Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding and exercisable at March 31, 2007
    
    
    260,000
    
    
    $
    1.50
      9




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (5)
    
    Stock Option Plan, Stock Incentive Plan and Stock Purchase Plan (continued)
  (6)
    
    Weighted Average Shares and Net Income Per Common Share
   Net LossAllocableFor the Three Months Ended
    
    to CommonMarch 31, 2007
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic and diluted loss per common share
before dividend and impairment loss
    
    $
    (1,009,000
    )
    
    
    2,552,411
    
    
    $
    (0.40
    )Preferred stock dividend
    
    
    (32,000
    )Basic and diluted loss per common share before
impairment loss
    
    
    (1,041,000
    )
    
    
    2,552,411
    
    
    
    (0.40
    )Impairment loss
    
    
    (832,000
    )
    
    
    2,552,411
    
    
    
    (0.33
    )Basic and diluted loss per common share
    
    $
    (1,873,000
    )
    
    
    2,552,411
    
    
    $
    (0.73
    )
 Net LossAllocable toFor the Three Months Ended
    
    CommonMarch 31, 2006
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic and diluted loss per common share
    
    $
    (538,000
    )
    
    
    2,455,888
    
    
    $
    (0.22
    )
   10




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (6)
    
    Weighted Average Shares and Net Income Per Common Share (continued)
 Net LossAllocable toCommonFor the Nine Months Ended March 31, 2007
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic and diluted loss per common share before
dividend, impairment loss and cumulative effect of
change in accounting principle
    
    $
    (2,548,000
    )
    
    
    2,529,452
    
    
    $
    (1.01
    )Preferred stock dividend
    
    
    (94,000
    )Basic and diluted loss per common share before
impairment loss and cumulative effect of change in
accounting principle
    
    
    (2,642,000
    )
    
    
    2,529,452
    
    
    
    (1.05
    )Impairment loss
    
    
    (4,056,000
    )
    
    
    2,529,452
    
    
    
    (1.60
    )Cumulative effect of change in accounting principle
    
    
    (438,000
    )
    
    
    2,529,452
    
    
    
    (0.17
    )Basic and diluted loss per common share
    
    $
    (7,136,000
    )
    
    
    2,529,452
    
    
    $
    (2.82
    )
 Net LossAllocable toCommonFor the Nine Months Ended March 31, 2006
    
    Shareholders
    
    
    Shares
    
    
    Per ShareBasic and diluted loss per common share
    
    $
    (828,000
    )
    
    
    2,414,191
    
    
    $
    (0.34
    )
  (7)
    
    Investments in Marketable Securities
   Unrealized(in thousands)
    
    Cost
    
    
    Gain/(Loss)
    
    
    Market ValueStocks:Integrity
Mutual Funds, Inc. (Note 11)
    
    $
    734
    
    
    $
    630
    
    
    $
    1,364Other
    
    
    7
    
    
    
    (7
    )
    
    
    741
    
    
    
    623
    
    
    
    1,364Bonds, maturing in:2008
    
    
    
    
    
    
    
    
    
    
    2009
    
    
    100
    
    
    
    (5
    )
    
    
    952010
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    6,159
    
    
    
    123
    
    
    
    6,2826,259
    
    
    
    118
    
    
    
    6,377Total
    
    $
    7,000
    
    
    
    741
    
    
    
    7,741
  11




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XPONENTIAL, INC. AND SUBSIDIARIES
 
 (7)
    
    Investments in Marketable Securities (continued)
  Unrealized(in thousands)
    
    Cost
    
    
    Gain/(Loss)
    
    
    Market ValueStocks:Integrity Mutual
Funds, Inc. (Note 11)
    
    $
    645
    
    
    $
    (59
    )
    
    $
    586Other
    
    
    7
    
    
    
    (7
    )
    
    
    652
    
    
    
    (66
    )
    
    
    586Bonds, maturing in:2008
    
    
    115
    
    
    
    14
    
    
    
    1292009
    
    
    352
    
    
    
    15
    
    
    
    3672010
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    8,479
    
    
    
    (234
    )
    
    
    8,2458,946
    
    
    
    (205
    )
    
    
    8,741Total
    
    $
    9,598
    
    
    $
    (271
    )
    
    $
    9,327
 (8)
    
    Derivative Instruments
  (9)
    
    Accumulated Other Comprehensive Income
  For the Three Month
    
    
    For the Three MonthPeriod Ended
    
    
    Period Ended(in thousands)
    
    March 31, 2007
    
    
    March 31, 2006Accumulated other comprehensive gain as of
December 31, 2006 and 2005
    
    $
    326
    
    
    $
    124Unrealized gain from available for sale securities
    
    
    416
    
    
    
    253Reclassification of realized gain included in net income
    
    
    
    
    
    
    (38
    )Accumulated other comprehensive gain
    
    $
    741
    
    
    $
    339
 For the Nine Month
    
    
    For the Nine MonthPeriod Ended
    
    
    Period Ended(in thousands)
    
    March 31, 2007
    
    
    March 31, 2006Accumulated other comprehensive gain (loss) as of
June 30, 2006 and 2005
    
    $
    (272
    )
    
    $
    198Unrealized gain from available for sale securities
    
    
    1,163
    
    
    
    91Reclassification of realized gain included in net
income
    
    
    (150
    )
    
    
    50Accumulated other comprehensive gain
    
    $
    741
    
    
    $
    339
 12




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (10)
    
    Investment in American IronHorse Motorcycle Company, Inc.
   2006
    
    
    2005
    
    
    2004Investment in American IronHorse as of fiscal years ended
June 30, 2006, 2005 and 2004  cost basis
    
    $
    6,451
    
    
    $
    4,835
    
    
    $
    3,018Add: % share of net income (loss) from American
IronHorse for fiscal years ended June 30, 2006, 2005 and
2004
    
    
    (639
    )
    
    
    220
    
    
    
    (19
    )Add: cumulative net income (loss) prior fiscal years
    
    
    201
    
    
    
    (19
    )
    
    
    Cumulative adjustment due to change to equity method
    
    
    (438
    )
    
    
    201
    
    
    
    (19
    )Investment at end of each fiscal year under equity method
    
    $
    6,013
    
    
    $
    5,036
    
    
    $
    2,999
   13




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (10)
    
    Investment in American IronHorse Motorcycle Company, Inc. (continued)
  As of
    
    
    As ofMarch 31, 2007
    
    
    June 30, 2006(in thousands)
    
    (Unaudited)
    
    
    (Unaudited)Current assets
    
    $
    23,325
    
    
    $
    30,064Current liabilities
    
    $
    24,584
    
    
    $
    23,611Total assets
    
    $
    26,026
    
    
    $
    33,909Total liabilities
    
    
    24,639
    
    
    
    23,803Stockholders equity
    
    $
    1,387
    
    
    $
    10,106
 For the
    
    
    For theThree Months Ended
    
    
    Three Months EndedMarch 31, 2007
    
    
    March 31, 2006(in thousands)
    
    (Unaudited)
    
    
    (Unaudited)Total revenue
    
    $
    8,129
    
    
    $
    11,989Net loss
    
    $
    (2,686
    )
    
    $
    (1,987
    )
 For the
    
    
    For theNine Months Ended
    
    
    Nine Months EndedMarch 31, 2007
    
    
    March 31, 2006(in thousands)
    
    (Unaudited)
    
    
    (Unaudited)Total revenue
    
    $
    29,439
    
    
    $
    39,052Net income (loss)
    
    $
    (8,719
    )
    
    $
    59
 (11)
    
    Investment in Integrity Mutual Funds, Inc.
    14




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (11)
    
    Investment in Integrity Mutual Funds, Inc. (continued)
    As of March 31, 2007
    
    
    As of June 31, 2006(in thousands)
    
    Cost
    
    
    Market Value
    
    
    Cost
    
    
    Market ValueCommon Stock
    
    $
    734
    
    
    $
    1,364
    
    
    $
    645
    
    
    $
    586Preferred Stock
    
    
    1,525
    
    
    
    1,525
    
    
    
    
    
    
    
    Promissory Note
    
    
    950
    
    
    
    950
    
    
    
    
    
    
    
    Total Investment in
Integrity
    
    $
    2,509
    
    
    $
    3,839
    
    
    $
    645
    
    
    $
    586
  (12)
    
    Operating Segment Information
  15




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
  Investment,Pawn
    
    
    Management andThree Months Ended March 31, 2007
    
    Lending
    
    
    Advisory Services
    
    
    ConsolidatedRevenues:Merchandise sales
    
    $
    3,278
    
    
    $
    
    
    
    $
    3,278Pawn service charges and related fee income
    
    
    1,526
    
    
    
    
    
    
    
    1,526Other income
    
    
    3
    
    
    
    
    
    
    
    3Total revenues
    
    
    4,807
    
    
    
    
    
    
    
    4,807Expenses:Cost of sales
    
    
    2,508
    
    
    
    
    
    
    
    2,508Store operating expenses
    
    
    1,675
    
    
    
    (56
    )
    
    
    1,619Corporate administrative expenses
    
    
    600
    
    
    
    182
    
    
    
    782Depreciation and amortization
    
    
    66
    
    
    
    15
    
    
    
    81Operating loss
    
    
    (42
    )
    
    
    (141
    )
    
    
    (183
    )Interest and dividend income
    
    
    39
    
    
    
    190
    
    
    
    229Interest expense
    
    
    (44
    )
    
    
    (535
    )
    
    
    (579
    )Gain on change of futures contracts value
    
    
    2
    
    
    
    
    
    
    
    2Gain on sale of marketable investments
    
    
    
    
    
    
    
    
    
    
    Loss from American IronHorse
    
    
    
    
    
    
    (476
    )
    
    
    (476
    )Loss before taxes and impairment loss
    
    $
    (45
    )
    
    $
    (962
    )
    
    $
    (1,007
    )Total Assets
    
    $
    13,454
    
    
    $
    12,764
    
    
    $
    26,218
 Investment,Pawn
    
    
    Management andThree Months Ended March 31, 2006
    
    Lending
    
    
    Advisory Services
    
    
    ConsolidatedRevenues:Merchandise sales
    
    $
    3,664
    
    
    $
    
    
    
    $
    3,664Pawn service charges and related fee income
    
    
    1,499
    
    
    
    
    
    
    
    1,499Total revenues
    
    
    5,163
    
    
    
    
    
    
    
    5,163Expenses:Cost of sales
    
    
    2,431
    
    
    
    
    
    
    
    2,431Store operating expenses
    
    
    1,618
    
    
    
    (27
    )
    
    
    1,591Corporate administrative expenses
    
    
    513
    
    
    
    229
    
    
    
    742Depreciation and amortization
    
    
    83
    
    
    
    10
    
    
    
    93Operating loss
    
    
    518
    
    
    
    (212
    )
    
    
    306Interest and dividend income
    
    
    4
    
    
    
    196
    
    
    
    200Interest expense
    
    
    (30
    )
    
    
    (490
    )
    
    
    (520
    )Loss on change of futures contracts value
    
    
    (463
    )
    
    
    
    
    
    
    (463
    )Gain on sale of marketable investments
    
    
    
    
    
    
    38
    
    
    
    38Loss before taxes
    
    $
    29
    
    
    $
    (468
    )
    
    $
    (439
    )Total Assets
    
    $
    11,759
    
    
    $
    21,043
    
    
    $
    32,802
 16




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (12)
    
    Operating Segment Information (continued)
 Investment,Pawn
    
    
    Management andNine Months Ended March 31, 2007
    
    Lending
    
    
    Advisory Services
    
    
    ConsolidatedRevenues:Merchandise sales
    
    $
    10,496
    
    
    $
    
    
    
    $
    10,496Pawn service charges and related fee income
    
    
    4,721
    
    
    
    
    
    
    
    4,721Other
    
    
    25
    
    
    
    
    
    
    
    25Total revenues
    
    
    15,242
    
    
    
    
    
    
    
    15,242Expenses:Cost of sales
    
    
    8,035
    
    
    
    
    
    
    
    8,035Store operating expenses
    
    
    4,902
    
    
    
    (169
    )
    
    
    4,733Corporate administrative expenses
    
    
    1,694
    
    
    
    590
    
    
    
    2,284Depreciation and amortization
    
    
    204
    
    
    
    44
    
    
    
    248Operating income (loss)
    
    
    407
    
    
    
    (465
    )
    
    
    (58
    )Interest and dividend income
    
    
    58
    
    
    
    654
    
    
    
    712Interest expense
    
    
    (211
    )
    
    
    (1,614
    )
    
    
    (1,825
    )Loss on change of futures contracts value
    
    
    19
    
    
    
    
    
    
    
    19Gain on sale of marketable investments
    
    
    
    
    
    
    150
    
    
    
    150Loss from American IronHorse
    
    
    
    
    
    
    (1,544
    )
    
    
    (1,544
    )Income (loss) before taxes, impairment loss and
cumulative effect of change in accounting principle
    
    $
    273
    
    
    $
    (2,819
    )
    
    $
    (2,546
    )Total Assets
    
    $
    13,454
    
    
    $
    12,764
    
    
    $
    26,218
 17




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##### Table of Contents



XPONENTIAL, INC. AND SUBSIDIARIES
 
 (12)
    
    Operating Segment Information (continued)
 Investment,Pawn
    
    
    Management andNine Months Ended March 31, 2006
    
    Lending
    
    
    Advisory Services
    
    
    ConsolidatedRevenues:Merchandise sales
    
    $
    11,513
    
    
    $
    
    
    
    $
    11,513Pawn service charges and related fee income
    
    
    4,634
    
    
    
    
    
    
    
    4,634Other
    
    
    30
    
    
    
    
    
    
    
    30Total revenues
    
    
    16,177
    
    
    
    
    
    
    
    16,177Expenses:Cost of sales
    
    
    8,271
    
    
    
    
    
    
    
    8,271Store operating expenses
    
    
    4,693
    
    
    
    (27
    )
    
    
    4,666Corporate administrative expenses
    
    
    1,459
    
    
    
    683
    
    
    
    2,142Depreciation and amortization
    
    
    276
    
    
    
    15
    
    
    
    291Operating income (loss)
    
    
    1,478
    
    
    
    (671
    )
    
    
    807Interest and dividend income
    
    
    6
    
    
    
    472
    
    
    
    478Interest expense
    
    
    (133
    )
    
    
    (1,155
    )
    
    
    (1,288
    )Loss on change of futures contracts value
    
    
    (936
    )
    
    
    
    
    
    
    (936
    )Gain on sale of marketable investments
    
    
    
    
    
    
    219
    
    
    
    219Income (loss) before taxes
    
    $
    415
    
    
    $
    (1,135
    )
    
    $
    (720
    )Total Assets
    
    $
    11,759
    
    
    $
    21,043
    
    
    $
    32,802
 
 18




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Statements appearing in the following discussion that are not historical facts are
forward-looking statements (forward-looking statements) within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors created by those sections. Such
forward-looking statements are necessarily estimates reflecting the best judgment of the Companys
management based upon current information and involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results, performance or achievements
expressed 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 time to time in
filings made by the Company with the Securities and Exchange Commission. These risks,
uncertainties and other factors should not be construed as exhaustive and the Company does not
undertake, and specifically disclaims any obligation, to update any forward-looking statements to
reflect occurrences or unanticipated events or circumstances after the date of such statements.
 In addition, the following discussion and analysis should be read in conjunction with the
Companys financial statements and notes thereto and other financial data included in the Companys
Form 10-KSB for the fiscal year ended June 30, 2006.
       19




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20




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##### Table of Contents



For the Three Months Ended
    
    For the Nine Months EndedMarch 31
    
    March 312007
    
    2006
    
    2007
    
    2006Merchandise sales
    
    
    68.2
    %
    
    
    71.0
    %
    
    
    68.9
    %
    
    
    71.2
    %Pawn service charges and related fee income
    
    
    31.7
    
    
    
    29.0
    
    
    
    31.0
    
    
    
    28.6Other income
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    0.2Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of sales
    
    
    52.2
    
    
    
    47.1
    
    
    
    52.7
    
    
    
    51.1Store operating expenses
    
    
    33.7
    
    
    
    30.8
    
    
    
    31.1
    
    
    
    28.9Corporate administrative expenses
    
    
    16.2
    
    
    
    14.4
    
    
    
    15.0
    
    
    
    13.2Depreciation and amortization
    
    
    1.7
    
    
    
    1.8
    
    
    
    1.6
    
    
    
    1.8Operating income (loss)
    
    
    (3.8
    )
    
    
    5.9
    
    
    
    (0.4
    )
    
    
    5.0Interest and dividend income
    
    
    4.8
    
    
    
    3.9
    
    
    
    4.7
    
    
    
    3.0Interest expense
    
    
    (12.1
    )
    
    
    (10.1
    )
    
    
    (12.0
    )
    
    
    (8.0
    )Gain (loss) on futures contracts
    
    
    0.0
    
    
    
    (9.0
    )
    
    
    0.1
    
    
    
    (5.8
    )Gain (loss) on sale of marketable securities
    
    
    0.0
    
    
    
    0.8
    
    
    
    1.0
    
    
    
    1.4Loss from American IronHorse
    
    
    (9.9
    )
    
    
    
    
    
    
    (10.1
    )
    
    
    Loss before income taxes, impairment loss and
cumulative effect of change in accounting principle
    
    
    (21.0
    )
    
    
    (8.5
    )
    
    
    (16.7
    )
    
    
    (4.4
    )Income tax expense
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    0.1Loss before impairment loss and cumulative
effect of change in accounting principle
    
    
    (21.0
    )%
    
    
    (9.8
    )%
    
    
    (16.7
    )%
    
    
    (4.5
    )%
    Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
   21




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##### Table of Contents



For the Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Jewelry
    
    
    
    
    
    
    
    
    
    
    Jewelry(In thousands)
    
    Merchandise
    
    
    Refining
    
    
    Total
    
    
    Merchandise
    
    
    Refining
    
    
    TotalSales
    
    $
    2,339
    
    
    $
    939
    
    
    $
    3,278
    
    
    $
    2,597
    
    
    $
    1,067
    
    
    $
    3,664Pawn Service Charges
and Other Income
    
    
    
    
    
    
    
    
    
    
    1,529
    
    
    
    
    
    
    
    
    
    
    
    1,499Total Revenue
    
    
    2,339
    
    
    
    939
    
    
    
    4,807
    
    
    
    2,597
    
    
    
    1,067
    
    
    
    5,163Cost of Sales
    
    
    1,630
    
    
    
    878
    
    
    
    2,508
    
    
    
    1,848
    
    
    
    583
    
    
    
    2,431Gross Profit
    
    $
    709
    
    
    $
    61
    
    
    $
    2,299
    
    
    $
    749
    
    
    $
    484
    
    
    $
    2,732Profit Margin
    
    
    30.3
    %
    
    
    6.5
    %
    
    
    47.8
    %
    
    
    28.8
    %
    
    
    45.4
    %
    
    
    52.9
    %
      22




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##### Table of Contents



Nine Months Ended March 31, 2007 Compared to Nine Months Ended March 31, 2006
      For the Nine Months EndedMarch 31, 2007
    
    
    March 31, 2006Jewelry
    
    
    
    
    
    
    
    
    
    
    Jewelry(In thousands)
    
    Merchandise
    
    
    Refining
    
    
    Total
    
    
    Merchandise
    
    
    Refining
    
    
    TotalSales
    
    $
    7,627
    
    
    $
    2,869
    
    
    $
    10,496
    
    
    $
    8,195
    
    
    $
    3,318
    
    
    $
    11.513Pawn Service Charges
and Other Income
    
    
    
    
    
    
    
    
    
    
    4,746
    
    
    
    
    
    
    
    
    
    
    
    4,664Total Revenue
    
    
    7,627
    
    
    
    2,869
    
    
    
    15,242
    
    
    
    8,195
    
    
    
    3,318
    
    
    
    16,177Cost of Sales
    
    
    5,529
    
    
    
    2,506
    
    
    
    8.035
    
    
    
    6,063
    
    
    
    2,208
    
    
    
    8,271Gross Profit
    
    $
    2,098
    
    
    $
    363
    
    
    $
    7,207
    
    
    $
    2,132
    
    
    $
    1,110
    
    
    $
    7,906Profit Margin
    
    
    27.5
    %
    
    
    12.7
    %
    
    
    47.3
    %
    
    
    26.0
    %
    
    
    33.5
    %
    
    
    48.9
    %
 23




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##### Table of Contents



24




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##### Table of Contents



ITEM 3. CONTROLS AND PROCEDURES
   25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Shares Voted
    
    Shares as to Which VotingName
    
    For Election
    
    Authority WithheldCarroll Dawson
    
    
    1,743,349
    
    
    
    15,340James R. Richards
    
    
    1,744,143
    
    
    
    14,546Robert W. Schleizer
    
    
    1,744,743
    
    
    
    13,943
  Shares Voted
    
    Shares as to Which VotingName
    
    For Election
    
    Authority WithheldJ. Robert Collins
    
    
    396,732
    
    
    
    8,088Jeffrey A. Cummer
    
    
    396,732
    
    
    
    8,088Dwayne A. Moyers
    
    
    402,124
    
    
    
    2,696John H. Wilson
    
    
    396,732
    
    
    
    8,088
  
 ITEM 6. EXHIBITS
 Number
    
    Description31.1
    
    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 *
 
 *
    
    Filed herewith. 26




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##### Table of Contents



SIGNATURES
  XPONENTIAL, INC. (Registrant)May 19, 2007
    By:
    /s/ Robert W. SchleizerRobert W. Schleizer, Executive VicePresident and Chief Financial Officer 27




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant
to Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934, as amended31.2
    
    Certification of Chief Financial Officer pursuant
to Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934, as amended32.1
    
    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 200232.2
    
    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