December 23, 2011
Dear Stockholders,
Enclosed are the audited consolidated financial statements for the fiscal year ended June 30, 2011 for
Xponential, Inc. and its subsidiaries (“Xponential” or the “Company”). As in fiscal 2009 and 2010,
the fiscal 2011 financial statements contain a “going concern” opinion by our independent auditors.
The qualified opinion reflects the concerns of our independent auditors based on the lack of liquidity
and the forecasted obligations of the Company.
Despite the concerns, we have had a very solid year at PawnMart, Inc. (“PawnMart”), our wholly owned
subsidiary. Earnings and outstanding pawn loans have increased significantly for the third
consecutive year, in part due to strong gold prices.
For fiscal year 2011, Xponential reported a net loss of $701,000 which included $2.7 million of
interest on our $20 million convertible debt and our operating line of credit.
The Company continues to reinvest cash flow to ensure the successful operation of its pawn business
and maximize the long term value of the enterprise. The Board of Directors will continue to preserve
liquidity to meet our current operating obligations, with the long term goal of fulfilling its obligations
to its creditors and preferred stockholders, while maximizing value for all stockholders. The actions
taken by the Board of Directors have been made after consultation with our independent auditors and
legal counsel. We will keep you apprised as significant events occur that may impact the decisions
we made to protect our current liquidity position.
Our management team has been actively pursuing pawn shop acquisition opportunities to increase
enterprise value with our improved operating platform. We acquired the assets of a pawnshop and a
title loan shop in November and then at the close of business in fiscal 2011, PawnMart acquired the
assets of Cherokee Pawn, the premier pawn shop in the greater Atlanta, Georgia area. Cherokee
Pawn has operated in the market for over 35 years and in addition to bringing pawn loans and
inventory totaling nearly $1 million to the Company, with the acquisition we have expanded our
expertise in coins and gold bullion sales which will add to the entire organization’s profitability and
enterprise value.
To accomplish the acquisitions we successfully increased our line of credit to $10 million and
arranged financing for the Cherokee acquisition to through a related party.
As reported last year, the investment in Capital Financial Holdings, Inc. (“CFH”) [CPFH – OTC]
continued to be a disappointment on several fronts, particularly in the lack of liquidity in the stock
and the unlikely ability to monetize the preferred stock and convertible note holdings. As a result,
we entered into negotiations with CFH to sell back the convertible note for cash to reinvest in the
pawn operation expansion. In September 2010, we successfully negotiated a settlement for the long
term convertible note for cash and a short term note in the amount of $715,000. Additionally, in
September 2011, subsequent to the close of fiscal 2011, we were successful in converting the
preferred stock to a note receivable secured by a first lien on the headquarters building of CFH in the
amount of $1,300,000, which will be paid out over a six year period beginning in 2012. We believe
these actions provided the best opportunity for us to maximize the overall enterprise value for all the
stockholders.
Stockholders can view the financial statements, and other pertinent Xponential stockholder
information at our website www.xponential.us.
The annual meeting of stockholders will be held on January 18, 2012 at 9:00 a.m. A complete proxy
with the audited consolidated financial statements is included for your review.
Sincerely,
Xponential, Inc.
Jeffrey A. Cummer
Chief Executive Officer and
Chairman of the Board
Robert W. Schleizer
Executive Vice President and
Chief Financial Officer
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