Xponential Inc (fka XPOI)

[mrpanick]

??March 8, 2013
Dear Stockholders,
Enclosed are the audited consolidated financial statements for the fiscal year ended June 30, 2012 for Xponential, Inc. and its subsidiaries (“Xponential” or the “Company”). The current year financial statements no longer contain the “going concern” opinion by our independent auditors as was included in our audited financial statements for the prior three fiscal years. This is clear evidence that the Company’s efforts over the past several years have resulted in an improving financial position for the Company.
The operations of PawnMart, Inc. (“PawnMart”), our wholly-owned subsidiary, continued to improve as we grew our store base. We reported last year that we were aggressively pursuing store additions. Over the past year and a half we have grown our store base from 25 to 34 stores. Revenues, earnings and outstanding pawn loans have increased significantly for the fourth consecutive year.
For fiscal year 2012, Xponential reported a net loss of $579,000, but operating income increased from $1.9 million in fiscal 2011 to $2.8 million this year. Our interest expense increased by $636,000 over the prior year as we financed our growth utilizing available lines of credit and other term financing.
Debt financing was used to purchase existing stores and to open five new stores to continue the Company’s efforts to fill out our dominant footprint in Georgia. We invested $2.8 million in capital expenditures in fiscal 2012 to upgrade and expand existing stores and to open new stores. Our decision to finance the investments with debt is based on our strong cash flow and our intent to increase enterprise value for our existing shareholders.
The Company’s solid base of 31 stores in Georgia includes five new stores that will serve as signature PawnMart stores and will bring additional value to the enterprise based on their locations and the quality of the real estate utilizing our enhanced layout and image. The Company took full advantage of the real estate downturn to renegotiate, extend terms and expand its store size to accommodate the loan base growth at very favorable terms that we believe will add to the overall enterprise value.
Our investment in Capital Financial Holdings, Inc. (“CFH”) [CPFH – OTC] has continued to show no near-term promise. Thus we have been liquidating our positions so the funds can be better utilized in our pawnshop business and expansion. We sold the $950,000 convertible note to CFH at a discount for $715,000, which was paid off in fiscal 2012. Additionally, in September 2011, we were successful in converting the preferred stock to a note receivable in the amount of $1.3 million secured by a first lien on the headquarters building of CFH. CFH sold the building in March 2012 and prepaid $1 million of the outstanding note balance in exchange for our release of the real estate lien. The note has a current balance of approximately $250,000, and we expect CFH to repay the note in full by April 30, 2013. We also still have our common stock holdings, the smaller in dollar terms of our two remaining investments, and will continue to seek liquidation or a realization of value.
6400 Atlantic Blvd., Suite 190, Norcross, Georgia 30071 Phone: [phone] Fax: [phone]
The upcoming year will be focused on absorbing our acquisitions, continued upgrades to existing stores and maturation of the five new stores we opened in the last 18 months. We remain confident and excited about the continued growth of the PawnMart brand.
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 April 12, 2013 at 9:00 a.m. at the Hilton Inn at 2401 East Lamar Boulevard, Arlington, Texas 76006. A complete proxy statement with the audited consolidated financial statements is included for your review.
Sincerely, Xponential, Inc.
Jeffrey A. Cummer Robert W. Schleizer
Chief Executive Officer and Executive Vice President and Chairman of the Board Chief Financial Officer
???6400 Atlantic Blvd., Suite 190, Norcross, Georgia 30071 Phone: [phone] Fax: [phone]
XPONENTIAL, INC.
6400 Atlantic Boulevard, Suite 190 Norcross, Georgia 30071
Notice of Annual Meeting of Stockholders To Be Held April 12, 2013
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of Xponential, Inc., a Delaware corporation (the “Company”), will be held on Friday, April 12, 2013 at 9:00 a.m. local time, at the Hilton Arlington, 2401 East Lamar Boulevard, Arlington, Texas 76006 for the following purposes:
1. To elect five directors of the Company;
2. To approve the appointment of Habif, Arogeti & Wynne, LLP as independent public accountants of the Company for its fiscal year ending June 30, 2013 and
3. To transact such other business as may properly come before the Annual Meeting or any adjournments thereof.
Only Stockholders of record at the close of business on March 8, 1013 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof.
Directors and officers of the Company, as well as a representative of the Company’s independent accountants, will be present at the Annual Meeting to respond to any questions you may have.
Reference is made to the accompanying Proxy Statement for further information with respect to the business to be transacted at the Annual Meeting.
WE HOPE YOU WILL BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
Jeffrey A. Cummer, Chairman of the Board
?March 15, 2013 Norcross, Georgia
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
XPONENTIAL, INC.
6400 Atlantic Boulevard, Suite 190 Norcross, Georgia 30071
PROXY STATEMENT
for the
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 12, 2013
This Proxy Statement is furnished to the Stockholders of Xponential, Inc., a Delaware corporation (the “Company”), in connection with the solicitation by the Company of proxies to be used in voting at the Annual Meeting of Stockholders (together with any and all adjournments thereof, the “Annual Meeting”) to be held at 9:00 a.m., local time, on Friday, April 12, 2013, at the Hilton Arlington, 2401 East Lamar Boulevard, Arlington, Texas 76006 for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement, the foregoing notice, the enclosed form of proxy and a copy of the Company’s audited financial statements for the fiscal year ended June 30, 2012 are being mailed to the Stockholders of the Company on or about March 8, 2013.
The Company will bear the entire cost of solicitation, including the preparation, assembly, printing, and mailing of this Proxy Statement, the proxy, and any additional soliciting material furnished to Stockholders. The original solicitation of proxies by mail may be supplemented by solicitation by telephone, telegram, or other means by directors, officers, employees or agents of the Company.
If the enclosed form of proxy is properly executed and returned, the shares represented thereby will be voted in the manner specified. If no specification is made on the form of proxy, the shares shall be voted in favor of the recommendations of the Board of Directors. A proxy may be revoked by a Stockholder at any time prior to the actual exercise of it by written notice to the Secretary of the Company, by submission of another proxy bearing a later date, or by attending the Annual Meeting and voting in person.
Discretionary authority is provided in the proxy as to any matters not specifically referred to in it. Management is not aware of any other matters which are likely to be brought before the Annual Meeting; however, if any such matters properly come before the Annual Meeting, it is understood that the proxy holder or holders are fully authorized to vote thereon in accordance with the proxy holder’s or holders’ judgment and discretion.
RECORD DATE AND VOTING SECURITIES
As of March 8, 2013 (the “Record Date”), the Company had 3,000,411 shares of Common Stock, $0.01 par value per share (the “Common Stock”), issued and outstanding and 500,042 shares of Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred”), issued and outstanding. The Common Stock and the Series
B Preferred constitute all of the securities of the Company entitled to vote at the Annual Meeting. Only Stockholders of record at the close of business on the Record Date will be entitled to notice of, and to vote at, the Annual Meeting.
Each share of Common Stock entitles the holder thereof to one vote with respect to each proposal presented in this Proxy Statement to be voted upon at the Annual Meeting. Except for the election of directors, each share of Series B Preferred entitles the holder thereof to 3.44 votes with respect to each proposal presented in this Proxy Statement to be voted upon at the Annual Meeting. Except for the election of directors, the Common Stock and the Series B Preferred vote together as a single class with respect to each of such proposals.
REVOCATION OF PROXIES
A Stockholder who executes a proxy has the power to revoke it at any time prior to its being exercised by giving written notice to the Secretary of the Company or by timely delivering a valid, later-dated proxy. A Stockholder may also revoke a previously given proxy by appearing and voting at the Annual Meeting. Attendance at the Annual Meeting by a Stockholder will not, in and of itself, constitute a revocation by such Stockholder of any proxy previously given.
QUORUM AND VOTING REQUIREMENTS
A quorum for the Annual Meeting requires the presence in person or by proxy of the holders of one-third (1/3) of the shares of each class entitled to vote at the Annual Meeting. If a quorum is not present, the Annual Meeting may be adjourned from time to time without further notice, if the time and place of the adjourned meeting are announced at the meeting, until a quorum is obtained. Votes cast at the Annual Meeting will be tabulated by the persons appointed by the Company to act as inspectors of election for the Annual Meeting.
Directors will be elected by a favorable vote of a plurality of the shares of voting stock present and entitled to vote, in person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker non-votes as to the election of directors will not affect the election of the candidates receiving the plurality of votes.
Proposal 2 requires the affirmative vote of the holders of a majority of the shares of voting stock entitled to vote thereon that are present in person or represented by proxy at the Annual Meeting and that are voted for or against such Proposal. Therefore, abstentions and broker non-votes as to Proposal 2 will be deemed shares not entitled to vote on such Proposal, will not be counted as votes for or against such Proposal, and will not be included in calculating the number of votes necessary for approval of such Proposal.
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
Action will be taken at the Annual Meeting for the election of five directors, each of whom will serve for a one-year term.
The Board of Directors has nominated the five persons named below to stand for election as directors at the Annual Meeting. Each of the persons nominated presently serves as a director of the Company. It is intended that the attorneys-in-fact named in the proxy will vote FOR the election of the director nominees listed below, unless instructions to the contrary are given therein. These nominees have indicated that they are able and willing to serve as directors. However, if some unexpected occurrence should require the substitution of some other person or persons for any one or more of the nominees, it is intended that the attorneys-in-fact will vote FOR such substitute nominees as the Board of Directors may designate. All directors elected at the Annual Meeting will hold office for their respective terms and until their respective successors are elected and have qualified.
Series B Preferred Director Nominees
Dr. J. Robert Collins, 71, was appointed as a Director of the Company in July 2004. He is a member of the faculty at Texas A&M University-Commerce where he currently serves as Senior Lecturer and Executive in Residence. He lectures in Entrepreneurship and Systems Engineering. His prior assignments included Interim Department Head for the Department of Computer Science and the Department of Industrial Engineering and Technology. He joined the University in 1998 as a Distinguished Lecturer in Entrepreneurship. Prior to his academic role, he was a Corporate Vice President and Officer for E-Systems, Inc. Dr. Collins received a BS degree in Mathematics from Lamar University, ME and Ph.D. degrees in Electrical Engineering from Texas A&M University, and an MBA in Management from the University of Dallas.
Jeffrey A. Cummer, 55, was appointed Chief Executive Officer of the Company in June 2007, Chairman of the Board in January 2007 and Vice President and a Director in August 2002. He has served as Chairman of the Board of PawnMart, Inc. since October 2006 and served as Chief Executive Officer of PawnMart, Inc. from October 2006 to January 2007. He was appointed Executive Vice President and a Director of Xponential Advisors, Inc. and Xponential Real Estate Holdings, Inc. in October 2006. He has served as Chairman of the Board of Capital Financial Holdings, Inc. (formerly Integrity Mutual Funds, Inc.) since March 2007 and as a director since June 2006. Mr. Cummer served as President and a director of C/M Holdings, Inc. from November 1990 until its merger with and into the Company in August 2002. He has served as President, Cummer/Moyers Division, of Sanders Morris Harris Inc. since October 2000; and as President of Select Partners, Ltd., a Cayman Islands exempt corporation, since July 1999. He has served as President and Senior Portfolio Manager of SMH Capital Advisors, Inc. since May 1989 and is a registered investment advisor agent through that company. Mr. Cummer received a BA degree in Finance from the University of
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Illinois and a MSc (Masters of Science) from the University of London Centre for Financial Studies. Mr. Cummer is a Certified Financial Planner.
Robert W. Schleizer, 59, was appointed Executive Vice President, Chief Financial Officer, Treasurer and a Director of the Company in January 2001 and as Secretary in May 2001. Mr. Schleizer has served as Executive Vice President, Secretary, Treasurer and a Director of PawnMart, Inc. since January 2003; as Chief Financial Officer of PawnMart, Inc. from January 2003 to October 2007; as Chief Financial Officer, Secretary, Treasurer and a Director of Xponential Advisors, Inc. since October 2003; and as Chief Financial Officer, Secretary, Treasurer and a Director of Xponential Real Estate Holdings, Inc. since February 2005. Mr. Schleizer is managing partner of BlackBriar Advisors LLC, a financial advisory firm. He served as a managing director with BBK, Ltd., a financial advisory firm from June 2009 to December 2010, leading their Southwest practice. From October 1999 to May 2009 he was a partner with Tatum, LLC, a national firm of financial and technology professionals. Mr. Schleizer has extensive restructuring experience and is a Certified Insolvency Restructuring Adviser and Certified Turnaround Professional. He currently serves as chairman of the Turnaround Management Association Finance Committee.
Common Stock Director Nominees
Carroll Dawson, 59, was appointed as a Director of the Company in November 2002. Mr. Dawson has served as general partner of Dawson Properties, Ltd., which owns real estate and securities investments, since April 1996. He also served a director of the Bank of Weatherford in Weatherford, Texas from June 2000 until April 2007. He previously served as President of AB-CO Markets, Inc., a Blockbuster Video franchisee, from December 1992 until its sale in September 2006.
James R. Richards, 67, was appointed as a Director of the Company in May 2001. Mr. Richards is a Chartered Financial Analyst and is Managing Director of Texas Business Capital, Inc., a private equity investment and advisory firm and its 50% owned subsidiary, Nobles and Richards, Inc. a FINRA and SIPC Member broker/dealer. He is also the Chief Financial Officer of Lincoln Capital Management, LLC, a specialty finance company. Mr. Richards served as Managing Director of Dillon-Gage Securities, Inc., a NASD broker/dealer from 1999 to 2001, and as Managing Director of Corporate Finance, Inc., a private investment banking firm, from 1994 to 1999. He is a former certified public accountant, and worked with Deloitte & Touche, Certified Public Accountants, for ten years.
Nominees receiving the largest number of affirmative votes cast will be elected as directors up to the maximum number of directors to be chosen at the election. Accordingly, any shares not voted affirmatively, whether by abstention, broker non-vote or otherwise, will not be counted as affirmative votes cast for any director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF SERIES B PREFERRED VOTE “FOR” THE ELECTION AS
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DIRECTORS OF THE THREE PERSONS NAMED AS SERIES B PREFERRED DIRECTOR NOMINEES UNDER “PROPOSAL NO. 1: ELECTION OF DIRECTORS.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF COMMON STOCK VOTE “FOR” THE ELECTION AS DIRECTORS OF THE TWO PERSONS NAMED AS COMMON STOCK DIRECTOR NOMINEES UNDER “PROPOSAL NO. 1: ELECTION OF DIRECTORS.”
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval by the Stockholders, the Board has selected Habif, Arogeti & Wynne, LLP as independent public accountants of the Company for its fiscal year ending June 30, 2013. Habif, Arogeti & Wynne, LLP has acted in such capacity for the Company since June 30, 2008 and has reported that neither the firm nor any of its partners has any material direct or indirect financial interest in the Company, other than as independent public accountants.
Representatives of Habif, Arogeti & Wynne, LLP will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast on this proposal shall constitute ratification of Habif, Arogeti & Wynne, LLP as the Company’s independent auditors for the fiscal year ending June 30, 2013. Abstentions and broker non-votes will not be counted as voting and, therefore, will have no impact on the approval of the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE APPOINTMENT OF HABIF, AROGETI & WYNNE, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR ITS FISCAL YEAR ENDING JUNE 30, 2013.
ACTION TO BE TAKEN UNDER THE PROXY
Unless previously revoked, the shares represented by the enclosed proxy will be voted in accordance with the Stockholder’s directions if the proxy is duly executed and returned prior to the Annual Meeting. The shares will be voted FOR the election of the director nominees recommended by the Board of Directors and FOR approval of the appointment of Habif, Arogeti & Wynne, LLP as independent public accountants of the Company for its fiscal year ending June 30, 2013, unless the proxy is marked in such a manner as to withhold authority to so vote.
The accompanying proxy will also be voted in connection with the transaction of such other business as may properly come before the Annual Meeting, or any adjournment or adjournments thereof. Management knows of no other matters to be considered at the Annual Meeting. If, however, any other matters properly come before the Annual Meeting or any adjournment or adjournments thereof, the persons named
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XPONENTIAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 and 2011
XPONENTIAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS Index to Consolidated Financial Statements
ReportofIndependentCertifiedPublicAccountants....................................... 1 ConsolidatedBalanceSheets .......................................................... 2 ConsolidatedStatementsofOperations.................................................. 3 Consolidated Statements of Changes in Stockholders’ Deficit and Comprehensive Loss. . . . . . . . . . 4 ConsolidatedStatementsofCashFlows................................................. 5-6 NotestoConsolidatedFinancialStatements.............................................. 7-21
?REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders Xponential, Inc.:
We have audited the accompanying consolidated balance sheets of Xponential, Inc. (a Delaware Corporation) and subsidiaries (the Company) as of June 30, 2012 and 2011, and the related consolidated statements of operations, changes in stockholders' deficit and comprehensive loss, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Xponential, Inc. and subsidiaries as of June 30, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Atlanta, Georgia March 8, 2013
????
XPONENTIAL, INC. AND SUBSIDIARIES Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data)
Assets
Current assets: Cashandcashequivalents............................................................. Accountsandshorttermnotesreceivable.................................................. Pawnservicechargesreceivable ........................................................ Pawnloansreceivable................................................................ Promissorynotereceivable–CapitalFinancialHoldings,Inc. ................................. Inventories......................................................................... Prepaidexpensesandothercurrentassets..................................................
Totalcurrentassets ................................................................
Propertyandequipment,net.............................................................. Promissorynotereceivable–CapitalFinancialHoldings,Inc. ................................... InvestmentinCapitalFinancialHoldings,Inc................................................. Goodwill............................................................................ Bond issuance costs, net of amortization of $1,401 and $1,197 as of June 30, 2012 and 2011, respectively . . Otherassets,netofamortizationof$53and$21asofJune30,2012and2011,respectively .............
Totalassets ......................................................................
Liabilities and Stockholders’ Deficit
Current liabilities:
Bank line of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitionaccountspayable(SeeNote5)................................................. Accountspayableandaccruedexpenses................................................... Accruedpayrollandpayrolltaxes ....................................................... Deferredrent....................................................................... Deferredrevenues................................................................... Accruedinterest..................................................................... Cumulativepreferredstockdividendpayable(SeeNote9)..................................... Redeemable Preferred Stock – Series A; subject to mandatory redemption; 1,250,000 shares authorized; par
value $0.01; 5% cumulative dividend, liquidation preference $5.00 per share; 1,071,636 shares issued as of June 30, 2012 and 2011; 671,620 shares outstanding as of June 30, 2012 and 2011, respectively (See Note 9)
Totalcurrentliabilities.............................................................
Long term liabilities: Deferredrent....................................................................... Longtermdebt(SeeNote7) ...........................................................
8% limited recourse convertible notes, net of discount of $5 and $25 as of June 30, 2012 and 2011, respectively(SeeNote7)........................................................ ..... Total long term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (See Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ deficit:
Preferred stock - Series B; convertible, par value $0.01; 500,050 shares authorized; 5% cumulative dividend,
liquidation preference $5.00 per share; 500,042 shares issued and outstanding at June 30, 2012 and 2011,
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock $0.01 par value; 10,000,000 shares authorized: 3,000,411 and 2,750,411 shares issued at
June30,2012and2011,respectively.................................. ................. Treasurystock(65,500shares,atcost,atJune30,2012and2011)............................ .... Additionalpaid-incapital.......................................................... .... Accumulateddeficit.............................................................. .... Accumulatedothercomprehensiveloss ................................................... Totalstockholders’deficit .......................................................... Totalliabilitiesandstockholders’deficit ...............................................
See accompanying notes to consolidated financial statements -2-
As of June 30
2012 2011
$ 365 $ 524 322 771 1,092 837 8,930 7,606 121 75 5,005 4,504 563 486
???????$
$
16,398 14,803
6,117 4,356 131 -
96 1,404 2,616 2,479 492 696 233 220
26,083 $ 23,958
????7,740 $ -
899 596 39
385 222 629
3,358
13,868
248 2,968
19,995
23,211
37,079
5
30 (47) 6,290 (16,636) (638)
(10,996)
5,905 2,775 1,014
475
28
311
191
461
3,358
14,518
66 -
19,975
20,041
34,559
5
27 (47)
6,272 (16,002) (856)
(10,601)
????????????$ 26,083 $ 23,958
????
XPONENTIAL, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In Thousands)
Revenues:
Merchandise sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pawnservicechargesandrelatedfeeincome............................ Other.............................................................
Totalrevenues.................................................
Expenses: Costofsales....................................................... Storeoperatingexpenses............................................. Corporateadministrativeexpenses..................................... Depreciation.......................................................
Totalexpenses.................................................
Operatingincome ................................................
Interestanddividendincome ........................................... Interestexpense...................................................... Lossoninvestments .................................................. Storeclosingexpense .................................................
Lossbeforeprovisionforincometaxes................................... Incometaxexpense................................................... Netloss............................................................. $
For the Year Ended June 30, 2012
For the Year Ended June 30, 2011
??$
30,779 12,973 30
43,782
20,921 13,721 5,164 1,231
41,037
2,745
94 (3,248) (225)
-
(634) --
(634) $ (731)
$
23,237 10,278 22
33,537
15,055 11,128 4,627 838
31,648
1,889
171 (2,693) (56) (42)
????????(731)
??????See accompanying notes to consolidated financial statements -3-
?????????????????????????????????????????????????XPONENTIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Deficit and Comprehensive Loss For the Years Ended June 30, 2012 and June 30, 2011
(In Thousands, Except Share Data)
Preferred Stock
Additional Common Stock Paid-in Shares Amount Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Total Stockholders’ Deficit
Shares
Amount
Balances at July 1, 2010. . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 500,042
$ 5 —
$
(47) —
$ (9,947) (731)
2,750,411 $ 27 $ 6,272
— — —
— — — — 77 — 77
$
(15,271)
(731) —
$ (933)
Net loss . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss): Net unrealized gain on investments. Comprehensive loss . . . . . . . . . . . .
..................... —
..................... — .....................
—
Balances at June 30, 2011 . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 500,042
5
2,750,411 27 6,272
(16,002)
(856)
(654) (47) (10,601)
—
IssuanceofCommonStock...... Netloss..................... Other comprehensive income (loss): Net unrealized gain on investments . Comprehensiveloss............
..................... — ..................... —
— —
250,000 3 18 — — —
—
(634) —
— 21 — (634)
— — — — 218 — 218 (416)
..................... — .....................
—
500,042 $ 5 3,000,411 $ 30 $ 6,290 $ (16,636) $ (638) $ (47) $(10,996)
BalancesatJune30,2012 ..............................
See accompanying notes to consolidated financial statements -4-
XPONENTIAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands)
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net loss to net cash (used) provided by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortizationofwarrants ..........................................
Amortizationofloanoriginationfees ................................ Accruedinterest ................................................. Accrued interest added to long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of debt issuance costs. . . . . . ............................ Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pawnservicechargesreceivable .................................. Inventories.................................................... Prepaidexpensesandothercurrentassets........................... Accountspayableandaccruedexpenses............................ Accruedpayrollandpayrolltaxes................................. Deferredrent.................................................. Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities: Pawnloansmade................................................... Pawn loans repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventoriesacquiredfromloanforfeitures .............................. Storeacquisitions................................................... Proceedsfromsaleofinvestments..................................... Acquisitionaccountspayable(SeeNote5)............................. Payments received on promissory note receivable . . . . . . . . . . . . . . . . . . . . . . . . Purchasesofpropertyandequipment .................................. Purchaseofotherassets .............................................
Netcashusedininvestingactivities .............................
For the Year Ended June 30, 2012
(634)
1,231 19
32
199
218
225
204
449 (255) (455)
(77) (115)
121 193 74
1,429
(29,482) 14,916 13,310
(246) -
. (2,775) 1,123
(2,993) (26)
(6,173)
2,750 (33,190) 35,025
4,585
(159) 524
For the Year Ended June 30, 2011
$ (731)
838 19
21 188 - 56 204
31 (189) (220) (121) 495 105 (19) (7)
670
(24,117) 11,614 11,740
(100) 1,198 -
- (1,328) (78)
(1,071)
- (22,964) 23,199
235
(166) 690
??$
????????Cash flows from financing activities:
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paymentsonlineofcredit .......................................... Proceeds from line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Net(decrease)incashandcashequivalents ............................... Cashandcashequivalentsatbeginningofyear ............................
Cashandcashequivalentsatendofyear..................................
See accompanying notes to consolidated financial statements -5-
.
??????$ 365 $ 524
????
XPONENTIAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands), Except Share Data
Supplemental disclosures for cash flow information – store acquisitions For the fiscal year ended June 30, 2011:
Net acquisition payable for the acquisition of Cherokee Coin & Pawn on June 30, 2011:
Assets acquired ................................................................ $ 875 Goodwill.......................................................................... 1,900 Liabilities assumed............................................................... -
Net acquisition payable ....................................................... $ (2,775)-
?????Supplemental disclosures of non-cash flow information:
Cash paid for interest..................................................................... $
Transfer of construction in progress to property and equipment.................. $
2012 2011 2,596 $ 2,262- 2,821- $ 841-
??????????During the fiscal year ended June 30, 2012, the Company sold its preferred shares in Capital Finance Holdings,
Inc. in exchange for a secured promissory note receivable in the amount of $1,300. See Note 12.
During the fiscal year ended June 30, 2012, the Company issued a stock grant of 250,000 common shares to Gamma Partners, L.P. in conjunction with the $2,750 note purchase agreement entered into on July 6, 2011. The value of the stock grant of $21 was capitalized as loan fees and will be amortized over the life of the loan. See Note 5.
See accompanying notes to consolidated financial statements -6-
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2012 and 2011
(1) Organization and Business
Xponential, Inc. (“Xponential” or the “Company”) was incorporated in Delaware on January 13, 1994. On January 31, 2003, the Company formed a wholly-owned subsidiary, PawnMart, Inc., a Nevada corporation, and in June 2003 the Company transferred all assets and liabilities associated with the operations of its pawnshops to this subsidiary. PawnMart, Inc. is a specialty finance and retail enterprise principally engaged in establishing and operating stores that advance money secured by the pledge of tangible personal property, and buying and selling pre-owned merchandise. As of June 30, 2012, Xponential owned and operated 32 stores located in Georgia and North Carolina. In October 2003, the Company formed a wholly-owned subsidiary, Xponential Advisors, Inc., a Nevada corporation, to act as an advisor for other companies, including companies the Company may acquire. In February 2005, the Company formed a wholly-owned subsidiary, Xponential Real Estate Holdings, Inc., a Nevada corporation, to acquire real estate on which its pawnshops are located.
On August29, 2007, the registrant submitted a Certification of Termination of Registration on Form 15 to the Securities and Exchange Commission for the purpose of deregistering its common stock and suspended Section 15(d) reporting obligations under the Securities Exchange Act of 1934, as amended. Upon filing the Form 15, the registrant’s obligations to file certain reports with the SEC, including Forms 10-KSB, 10-QSB, and 8-K, were immediately suspended. The registrant’s securities ceased trading on the OTC Bulletin Board. The Company’s common shares continue to trade on the Pink Sheets, LLC quotation system.
(2) Summary of Significant Accounting Policies (a) Basis of Presentation
The consolidated financial statements include the accounts of Xponential, Inc. and its wholly-owned subsidiaries, Xponential Advisors, Inc. (“Advisors”), PawnMart, Inc. (“PawnMart”) and Xponential Real Estate Holdings, Inc. (“Holdings”), collectively known as the “Company.” All intercompany transactions have been eliminated.
(b) Cash and Cash Equivalents
The Company considers any highly-liquid investments with original maturities of three months or less to be cash equivalents.
(c) Concentration of Credit Risk Arising From Cash Deposits in Excess of Insured Limits
The Company maintains cash balances at several financial institutions. The accounts are insured up to limits set by the Federal Deposit Insurance Corporation. From time to time, the Company's cash balance exceeds such limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant risks on cash.
-7-
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(2) Summary of Significant Accounting Policies (Continued)
(d) Loans and Revenue Recognition
Pawn loans (“loans”) are generally made on the pledge of tangible personal property for one month, with an automatic extension period from ten to sixty days in accordance with statutory requirements except for loans on auto titles, which have shorter extension periods. Pawn service charges are accrued on a constant-yield-basis over the life of the loan on all pawn loans the Company deems collectible based on historical loan redemption statistics. If a loan is not repaid, the principal amount advanced on the loan, or the fair value of the collateral, if lower, exclusive of any uncollected pawn service charges, becomes the carrying value of the forfeited collateral inventories, which is recovered through sale. As of June 30, 2012 and 2011, the allowance for doubtful accounts was $-0-.
Pawn service charges receivable represent an amount equivalent to earned pawn service charges not collected as of June 30, 2012 and 2011, based on the Company’s historical loan redemption.
Merchandise sales consist of direct sales of merchandise to customers. Sales are recognized when title and risk of loss have passed to the customer, which is generally at the point of sale.
Interim payments from customers on layaway sales are credited to deferred revenue and subsequently recorded as income during the period in which final payment is received.
(e) Investments
Investments consist of marketable debt and equity securities available for sale. Available for sale securities are measured at fair value, with net unrealized gains and losses reported in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Realized gains and losses on the sale of securities are based on the specific identification method. The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary. If the decline in the fair value is judged to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in the consolidated statement of operations. At June 30, 2012 and 2011, the Company’s investments were not considered to be impaired.
(f) Inventories
Inventories are recorded at cost and represent merchandise acquired from forfeited loans, merchandise purchased directly from the public and merchandise purchased from vendors. The cost of inventories is determined on the specific identification method. Inventories are stated at the lower of cost or market; accordingly, inventory valuation allowances are established when inventory carrying values are in excess of estimated selling prices, net of direct costs of disposal. Management has evaluated inventories and recorded a valuation allowance of $242 and $164, respectively, for June 30, 2012 and 2011.
(g) Property and Equipment
Property and equipment are recorded at cost. Depreciation is determined on the straight-line method based on estimated useful lives of two to thirty one and one-half years for property and equipment. The costs of improvements on leased stores are capitalized as leasehold improvements and are amortized on the straight-line method over the shorter of the lease term or their estimated useful lives. The cost of buildings acquired and constructed is amortized over thirty one and one-half years.
-8-
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(2) Summary of Significant Accounting Policies (Continued) (g) Property and Equipment (Continued)
The cost of property retired or sold and the related accumulated depreciation is removed from the accounts, and any resulting gain or loss is recorded in the results of operations in the period retired.
The Company determines whether its property and equipment is impaired whenever events or circumstances indicate the carrying amount of its property and equipment may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future undiscounted net cash flows expected to be generated. If the carrying amount exceeds its estimated future net cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset. The Company did not recognize any impairment charges for the periods ended June 30, 2012 and 2011.
(h) Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation account is used to reduce the net deferred tax assets to amounts expected to be realized.
The Company accounts for the uncertainty in income taxes as prescribed by the minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.
The Company is no longer subject to income tax examinations for fiscal years prior to 2008.
(i) Advertising Costs
Advertising costs are expensed the first time advertising takes place. Advertising expense was approximately $750,000 and $549,000 for the fiscal years ended June 30, 2012 and 2011, respectively.
(j) Fair Values of Financial Instruments
Pawn loans are outstanding for a relatively short period of time, generally 90 days or less, depending on local regulations. The rate of finance and service charge is determined by regulatory guidelines and bears no valuation relationship to interest rate market movements. For these reasons, management believes that the fair value of pawn loans approximates their carrying value. The Company’s revolving line of credit with FCC, LLC d/b/a First Capital bears interest at a variable rate that is frequently adjusted on the basis of market rate changes and is equal to rates available for debt with similar characteristics. Accordingly, management believes the carrying value of such debt approximates its fair value. The fair values of the Company’s remaining long-term notes payable instruments are approximately $19,995,000 and bear interest at a fixed rate of 8% per annum. Management believes these debts bear interest rates equal to rates available for debt with similar characteristics and that the carrying value of the debt approximates its fair value. The carrying amount of all other financial instruments including cash, receivables and payables included in the Company’s consolidated balance sheet approximate fair value due to the short maturity of these instruments.
-9-
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(2) Summary of Significant Accounting Policies (Continued) (k) Stock Based Compensation
The Company measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of the Company’s equity awards is estimated using an option pricing model. The cost of equity awards granted to employees is recognized over the applicable vesting period. The company did not grant any equity awards in 2012 or 2011.
(l) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(m) Fair Value of Assets and Liabilities
The Company applies generally accepted accounting principles (GAAP) for fair value measurements of financial assets that are recognized or disclosed at fair value in the financial statements on a recurring basis. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Assets itemized below were measured at fair value during the year ended June 30, 2012 and 2011 using the market and income approaches (in thousands.) The income approach was used for Level 3.
Fair Value Measurements Using
?As of June 30, 2012
Investment in Capital Financial Holdings, Inc.
TotalAssets
Fair Value
Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
?????$ 96 $ 96 $ - $ -
$ 96 $ 96 $ - $ -
????????????- 10 -
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(2) Summary of Significant Accounting Policies (Continued) (m) Fair Value of Assets and Liabilities (Continued)
Fair Value Measurements Using
?As of June 30, 2011
Investment in Capital Financial Holdings, Inc.
Total Assets
Fair Value
$ 1,404
$ 1,404
Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)
$ 104
$ 104
$ $
Significant Other Observable Inputs (Level 2)
-
-
Significant Unobservable Inputs (Level 3)
$ 1,300
$ 1,300
?????????????????The table below presents reconciliation for assets measured at fair value on a recurring basis (in thousands):
Balance at June 30, 2010
Total realized and unrealized losses:
Included in earnings
Sales
Included in other comprehensive income
Balance at June 30, 2011
Total realized and unrealized losses:
Included in earnings
Sale proceeds
Included in other comprehensive income
Balance at June 30, 2012
Goodwill
$
1,081
- -
219
1,300
(225) (1,300)
225
-
Fair Value Measurements Using Significant Unobservable Inputs
?Investment in Capital Financial Holdings Preferred Stock
Investment in Capital Financial Holdings Promissory Note
$ 851
(136) (715)
-
-
- -
-
$ -
?????$
????(n)
Goodwill consists of the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in the purchase. Goodwill is required to be reviewed for impairment annually. Goodwill impairment occurs if the net book value of a reporting unit exceeds its estimated fair value. Management performed an analysis of goodwill assets and determined that there was no impairment for the years ended June 30, 2012, and 2011.
(o) Intangible Assets
Amortizing intangible assets are recorded at cost and consist of bond issue costs and loan origination costs. Bond issuance costs and loan origination fees costs are being amortized using the straight-line method over 10 years and 2.5 years, respectively.
- 11 -
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(3) Property and Equipment
Property and equipment consists of the following at June 30, 2012 and 2011, respectively (in
thousands):
Automobiles..................................... 2-3 $ 159 Furnitureandequipment........................... 5-7 3,642 Leaseholdimprovements........................... 3-10 4,024 Buildings ....................................... 31.5 1,506 Land........................................... 605 Constructioninprogress........................... 164
10,100 Less: accumulated depreciation and amortization. . . . . . . (3,983)
$ 6,117
$
Years of June 30, Useful life 2012
June 30, 2011
$ 171 2,275 2,424 1,266 605 426
7,167 (2,811)
4,356
???????????Construction in progress consisted of renovations to retail stores at June 30, 2012 and 2011, respectively. Depreciation expense was $1,231,000 and $838,000, respectively, for the years ended June 30, 2012 and 2011.
(4) Intangible Assets
Intangible assets are summarized as follows at June 30, 2012 (in thousands):
Estimated Initial Asset Useful Life Valuation
Goodwill................................................... N/A $ 2,616 Bond Issuance Costs................................. 10 Years 1,893 Loan Origination Fees.............................. 2.5 Years 121
$ 4,630
Accumulated Amortization
$-$ (1,401)
(53)
$ (1,454)
Net Book Value
2,616 492 68
3,176
Net Book Value
2,479 696 64
3,239
???????$
??????Intangible assets are summarized as follows at June 30, 2011 (in thousands):
Estimated Initial Accumulated Asset Useful Life Valuation Amortization
????Goodwill................................................. N/A $ 2,479 $ - $ Bond Issuance Costs............................... 10 Years 1,893 (1,197)
Loan Origination Fees............................ 2.5 Years 85 (21)
???$ 4,457 $ (1,218)
$
??????- 12 -
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(4) Intangible Assets (Continued)
The loan origination fees were included in other assets. Amortization expense of $236,000 and $225,000 is included in interest expense for the years ended June 30, 2012 and 2011, respectively. Estimated amortization expense for the next three years is as follows (in thousands):
For the Year Ending June 30,
2013
2014
2015
Amount
$ 239 236 85
$ 560
?????(5) Store Acquisitions
In December 2011, PawnMart acquired the assets of Belvedere Pawn for a cash purchase price of approximately $246,000.
The purchase price was allocated as follows:
Inventory............................. $ Pawn Loans Receivable............ Goodwill.............................. Net cash paid for acquisition...... $
46,000
63,000 137,000 246,000
???In November 2010, PawnMart acquired the assets of two stores located in Jonesboro, GA for cash in the amount of $1,100,000. On June 30, 2011, PawnMart purchased the assets of Cherokee Coin and Pawn located in Alpharetta, GA for $2,775,000. The purchase price for each acquisition was allocated as follows:
Pawn Loans Inventory Receivable
Jonesboro $ 158,000 $ 363,000 $ Cherokee Pawn 280,000 595,000
$ 438,000 $ 958,000 $
Goodwill
579,000 1,900,000 2,479,000
Total
$ 1,100,000 2,775,000 $ 3,875,000
????????????????As of June 30, 2011, certain funds for the acquisition of Cherokee Pawn have not been transferred and PawnMart reported the $2,775,000 due to the seller as an acquisition payable. PawnMart completed the funding of the Cherokee Pawn acquisition in July 2011. In conjunction with the acquisition, PawnMart obtained a $2,750,000 subordinated secured note from Gamma Partners, L.P., (“Gamma Note”) a limited partnership affiliated with Mr. Cummer, an officer of the Company. In conjunction with the subordinated secured note, the Company issued a stock grant of 250,000 of the Company’s par value $0.01 common shares to Gamma Partners in conjunction with the loan. The shares were valued at the current market price on the issuance date of $0.085 per common share. The associated stock grant value of $21,250 is included in other assets.
- 13 -
(6) Bank Line of Credit
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
PawnMart currently has a revolving credit facility with FCC, LLC, d/b/a First Capital, Kennesaw, Georgia (the “Lender”). The original agreement allowed for borrowings up to $4.75 million and matured on June 17, 2010. The loan was modified to increase the line of credit to $6 million in Fiscal 2010 in addition to extending the maturity to June 17, 2013. During Fiscal 2011, PawnMart further amended its bank line of credit to provide for borrowings up to $7 million and to provide an additional term advance in the amount of $1 million in conjunction with a store acquisition. The term advance is secured by a lien on PawnMart’s real estate assets, bears interest at the prevailing 30 Day LIBOR rate plus 8.75% (8.99% at May 1, 2012, the last payment date) and provides for amortization of the term advance in eighteen equal monthly payments. As of June 30, 2012, the amount outstanding on the term advance was $-0-.
In October 2011, the Company further amended the line of credit, providing for increased borrowings to $10 million through maturity in June 2014 with a decrease in interest of .75% to the prevailing 30 Day LIBOR rate plus 7.00% (7.24% at June 30, 2012) and increasing the Fiscal 2012 capital expenditure cap to $2 million. The bank line of credit is an asset-based loan with advances thereunder based on PawnMart’s eligible accounts receivable and inventory. The bank line of credit is collateralized by substantially all of the unencumbered assets of PawnMart and is guaranteed by the Company. At June 30, 2012 and 2011, an additional $57,000 and $1,675,000, respectively, was available to borrow pursuant to the available borrowing base, as defined in the line of credit agreement. The Company is required to maintain certain financial ratios and comply with certain covenants, including a prohibition against paying cash dividends on its common stock, $0.01 par value (the “Common Stock”), unless specifically approved by the Lender. At June 30, 2012 and 2011, the Company was in compliance with its loan covenants.
In Fiscal 2012, the Company amended its bank line of credit to provide for a bridge loan totaling $1.04 million in conjunction with a store acquisition. The bridge loan was secured by a lien on real estate assets, bore interest at the rate applicable to the line of credit and provides for outstanding principal balance to be paid in full upon the earlier of (i) the consummation of the Gamma Note, (ii) July 15, 2011, and (iii) the date on which the agreement terminates for any reason. As of June 30, 2012, the amount outstanding on the bridge loan was $-0-.
(7) Notes Payable
Notes payable consist of the following at June 30, 2012 and 2011, respectively (in thousands, except
share data):
June 30, 2012
June 30, 2011
$ 19,975
-
19,975 -
$ 19,975
??8% limited recourse secured convertible subordinated notes (“Convertible Notes”),
bearing interest at 8% per annum payable monthly, to mature December 31, 2014, collateralized by the common stock of PawnMart, net of discount of $6 and $25 at June30,2012and2011,respectively ....................................... $ 19,995
Note payable to Gamma Partners, a related party, bearing interest at 15% per annum, to mature on September 30, 2013, collaterized by a subordinate lien of substantially all of PawnMart’s assets. Interest is payable monthly at a rate of 7% per annum, with the remaining 8% per annum interest being accrued to maturity. As of June 30, 2012, the accrued and unpaid interest totaled $218. Gamma Partners has the option to receive a portion of the accrued and unpaid interest in common shares of the Company limited to 250,000 shares at a value of $1.00 per common share.
Total long-term debt
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,968
22,963 -
????Longtermdebt............................................................ $ 22,963
????- 14 -
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
(7) Notes Payable (Continued)
As of June 30, 2006, the Company had completed the private placement of $20,000, of 8% Limited Recourse Secured Convertible Subordinated Notes (“Convertible Notes”). The Convertible Notes bear interest at a rate of 8% per annum, payable monthly, and mature in December 2014, and are collateralized by the common stock of PawnMart. The Company had guaranteed the payment of interest on the Convertible Notes through December 31, 2008. The original principal amount plus any accrued and unpaid interest on the Convertible Notes are convertible at any time by the holders into shares of the Company’s Common Stock, based on a conversion price of $10 per common share. The Convertible Notes are redeemable, in whole or in part, at the option of the Company at any time or upon the sale of PawnMart; provided, however, if the closing price per share of the Common Stock immediately prior to the redemption notice is less than $15 per share, the Company will, in connection with such redemption, also issue to each holder of Convertible Notes a warrant to purchase that number of shares of Common Stock into which the Convertible Notes of such holder are convertible on the redemption date at an exercise price of $10.00 per share exercisable on or before the fifth anniversary date of the redemption date and otherwise in the form attached to the Convertible Notes. The Convertible Notes are subordinated to the Company’s current and future indebtedness including the Bank Line of Credit.
As of June 30, 2012 annual maturities of the outstanding long-term debt for each of the five years after June 30, 2012 is as follows (in thousands):
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) Income Taxes
$ - 2,968
19,995
$ 22,963
???The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 2012 and 2011 are presented below (in thousands):
June 30, 2012
Deferred tax assets: Netoperatinglosscarryforward........................... $ 5,833 Capital loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,857 Propertyandequipment ................................. 198 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Intangibleassets ....................................... 38
Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . 9,003 Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,003)
Netdeferredtaxassets.............................. $ —
$
$
June 30, 2011
5,723 2,780 288 57 39
8,887 (8,887)
—
??????????.
The provisions for income taxes differ from amounts determined by applying the expected federal statutory tax rate to income primarily from continuing operations before income taxes due to the effect of preferred dividends, and changes in tax valuation allowances. At June 30, 2012 and 2011, the Company has federal net operating loss carryforwards of approximately $15,002,000 and $14,693,000, respectively, which expire from 2013 to 2031, and a net capital loss carryforward of $8,404,000, which expires from 2013 to 2017. In addition, at June 30, 2012 and 2011, the Company has state net operating loss carryforwards of approximately $11,130,000 and $11,454,000, respectively, which expire from 2013 to 2031. A formal legal or tax opinion on the survival of the net operating loss carryforward, its future availability, or any limitation on the utilization of the net operating loss carryforward has not been obtained by management. Deferred tax valuation allowances of $9,003,000 and $8,887,000 offset deferred tax assets at June 30, 2012 and 2011, respectively, based on management’s determination that it is more likely than not that such amounts may not be subsequently realized.
- 15 -
(9) Equity
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
The Company has the authority to issue a total of 12,500,000 shares of stock, consisting of 2,500,000 shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”) issuable in series (“Series”), and 10,000,000 shares of Common Stock. Of the Preferred Stock, 1,250,000 shares are designated and known as Series A Preferred Stock (the “Series A Preferred Stock”) and 500,050 shares are designated and known as Series B Preferred Stock (the “Series B Preferred Stock”). The remaining shares of Preferred Stock may be issued from time to time in one or more Series. The Board of Directors is expressly authorized to provide for the issue of all or any of the remaining unissued and undesignated shares of the Preferred Stock in one or more Series, and to fix the number of shares and to determine or alter for each such Series, such powers, designations, preferences, and relative rights and limitations thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the General Corporation Law of the State of Delaware.
Issuance of Preferred Stock. The Company issued 1,071,636 shares of Series A Preferred Stock and 500,042 shares of Series B Preferred Stock to the stockholders of C/M Holdings, Inc. As of June 30, 2012 and 2011, 400,016 shares of Series A Preferred Stock have been redeemed. The preferences, rights and voting powers (and the qualifications, limitations, or restrictions thereof) of the Series A Preferred Stock and the Series B Preferred Stock are as follows:
Dividends. Holders of the Series A Preferred Stock and Series B Preferred Stock are each entitled to receive an annual cumulative cash dividend of $0.25 per share, payable quarterly in arrears. In December 2008, the Company’s Board of Directors determined that payment of dividends to the holders of Series A and Series B Preferred Stock would be suspended due to insufficient capital and concerns about liquidity. The Company did not pay dividends to the holders of Series A Preferred Stock and Series B Preferred Stock, respectively, for the years ended June 30, 2012 and June 30, 2011. Unpaid dividends accrue at a rate of $0.25 per share, but will not be paid until declared by the Board of Directors when it is determined the Company has sufficient capital to pay the dividends. The Company has accrued $629,000 and $461,000 for unpaid dividends to the holders of Series A Preferred Stock for June 30, 2012 and June 30, 2011, respectively. As of June 30, 2012 and 2011, total unpaid dividends for Series B Preferred Shareholders total $470,000 and $344,000, respectively.
The holders of Common Stock are entitled to receive such dividends, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Company that are legally available, provided that no dividends shall be declared or paid on the Common Stock if accrued dividends on the Series A Preferred Stock or Series B Preferred Stock, as the case may be, have not been paid. The Company currently does not anticipate declaring and paying any cash dividends on the Common Stock.
Redemption. The Company was required to redeem, on a pro rata basis, 100,000 shares of Series A Preferred Stock on April 30, 2005, and on each anniversary date thereafter until April 30, 2010, when the Company was required to redeem the balance of the shares of Series A Preferred Stock then outstanding, at the rate of $5.00 per share plus all accumulated but unpaid dividends thereon. Through June 30, 2012, 400,016 shares were redeemed for $2,000,080. In December 2008, the Company’s Board of Directors determined that redemption of additional shares of Series A Preferred Stock would be suspended due to insufficient capital and concerns about liquidity. The Company has the right, but not the obligation, to redeem, on a pro rata basis, the Series B Preferred Stock at any time after April 30, 2009, at the rate of $5.00 per share plus all accumulated but unpaid dividends thereon.
Conversion. The holders of Series A Preferred Stock have no conversion rights. The holders of the Series B Preferred Stock have the right, at any time, and on or before April 30, 2009, to convert each share of Series B Preferred Stock into such number of shares of Common Stock determined by dividing $5.00 by the Conversion Price then in effect. The initial Conversion Price will be approximately $1.4535 per share but is subject to anti-dilutive adjustment. The holders of Series B Preferred Stock have the right to convert the Series B Preferred Stock into approximately 45% of the issued and outstanding shares of Common Stock. The terms of this conversion did not result in a beneficial conversion feature.
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(9) Equity (Continued)
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement June 30, 2012 and 2011
Liquidation Preference. In the event of the liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the assets of the Company available for distribution shall be distributed in the following order of preference: to the holders of Series A Preferred Stock, in an amount per share equal to $5.00 per share (as such dollar amount may be adjusted for stock splits, combinations, reclassifications and the like with respect to the Series A Preferred Stock) plus all accumulated but unpaid dividends thereon; then to the holders of Series B Preferred Stock, in an amount per share equal to $5.00 per share (as such dollar amount may be adjusted for stock splits, combinations, reclassifications and the like with respect to the Series B Preferred Stock) plus all accumulated but unpaid dividends thereon; and then to the holders of the Common Stock.
Voting. The holders of Series A Preferred Stock have no voting rights except as required by law. Except for the election of the members of the Board of Directors of the Company, each share of Series B
Preferred Stock entitles the holder thereof to 3.44 votes with respect to all matters upon which holders of Common Stock have the right to vote. Such votes are counted together with the votes of the holders of the Common Stock and not separately as a class except as otherwise provided with respect to the election of directors. The holders of Common Stock have one vote in respect of each share of Common Stock held by such stockholder for all matters submitted to a vote of stockholders of the Company. Cumulative voting is not permitted. The Board of Directors consists of seven members. The holders of a plurality of the shares of Series B Preferred Stock, voting as a class, are entitled to elect four members of the Board of Directors, and the holders of a plurality of the shares of Common Stock, voting as a class, are entitled to elect three members of the Board of Directors.
Issuance of Common Stock. During 2002 the Company issued 2,079,948 shares of Common Stock which represents approximately 55% of the issued and outstanding shares of Common Stock of the Company, after giving effect to the conversion of all of the Series B Preferred Stock issued to the preferred shareholders. During 2012 and 2011, the Company (1) received no net proceeds from the sale of Common Stock upon exercise of stock options granted pursuant to the Company’s Stock Option Plan (as defined in Note 10) and (2) received no proceeds from the sale of Common Stock to current and former employees pursuant to the Company’s Incentive Plan (as defined in Note 10).
Treasury Stock. The Company purchased no shares of Common Stock during Fiscal years 2012 and 2011.
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XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statement
June 30, 2012 and 2011
(10) Stock Option Plan, Stock Incentive Plan, Stock Purchase Plan and Warrants to Purchase Common Stock
The Company adopted its 2003 Stock Option Plan (“Stock Option Plan”) effective January 1, 2003. Under the Stock Option Plan, stock options have been awarded to directors, officers and employees. These stock options vest either immediately or over a period up to two years from the date of grant and expire ten years thereafter. The Company recognized $-0- of compensation expense for options granted for the years ended June 30, 2012 and 2011.
The following table summarizes the stock option activity of the Company:
????OutstandingatJune30,2010................ Granted ................................. Exercised................................ Forfeited/Cancelled........................ OutstandingatJune30,2011................ Granted ................................. Exercised................................ Forfeited/Cancelled........................ OutstandingatJune30,2012................ ExercisableatJune30,2012 ................ ExercisableatJune30,2011 ................
Options Outstanding
Number of
Underlying Exercise
Shares Price
300,000 $ 1.45 — — — — — —
300,000 1.45
— — — — — —
300,000 $ 1.45
300,000 $ 1.45
300,000 $ 1.45
Weighted average remaining contractual life
3.3 years
2.3 years
1.3 years
?????????????????????????????????????????????There were no options granted during 2012 and 2011 for shares of the Company’s common stock.
The Company adopted its 2003 Stock Incentive Plan (the “Incentive Plan”) effective January 1, 2003. A total of 325,000 shares of common stock were reserved under the Incentive Plan. The Incentive Plan provides an opportunity to employees of the Company to purchase common shares directly from the Company through payroll deductions. As of June 30, 2012 and 2011, 154,363 shares have been issued under the Incentive Plan. The Company adopted its 2005 Stock Purchase Plan (the “Stock Purchase Plan”) effective May 1, 2005. A total of 250,000 shares of Common Stock are reserved for issuance under the Stock Purchase Plan. The Stock Purchase Plan allows employees and director to purchase Common Stock at a discount of 15% to the fair market price. The Company recognized $-0- in compensation expense for the years ended 2012 and 2011, respectively, for Common Stock purchases pursuant to the Stock Purchase Plan. As of June 30, 2012 and 2011, 250,000 shares have been issued under the Stock Purchase Plan.
The 200,000 warrants issued in connection with the Convertible Notes allow the holder to purchase one share of the Company’s Common Stock at $11.00 per share and are valued at $0.62 each, for a total of $124,000, which is reflected as a discount on the debt and an increase in the Company’s additional paid-in capital. The Company used the Black-Sholes option pricing model to determine the fair value of all warrants issued. Implementation of the Black-Sholes option pricing model requires the Company to make certain assumptions, including expected volatility, risk-free interest rate, expected dividend yield and expected life of the options. The Company utilized assumptions that it believed to be most appropriate at the time of the valuation, which include the following assumptions: risk-free rate of 4.40%, no dividend yield, 52.1% volatility in the stock price, and weighted average expected lives of 84 months at the time of issuance.
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(11) Investments
XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2012 and 2011
During 2011, the Company sold bond investments with a cost basis of $380,000 at a sale price of $559,000 resulting in a gain on sale of $179,000. The Company recorded an unrealized loss of $212,000 to reflect the change in fair value of this investment during 2011. As of June 30, 2012 and 2011, the Company did not hold any investments in bonds.
(12) Investments in Capital Financial Holdings, Inc.
The Company reported its investment in the common stock of Capital Financial Holdings, Inc. (“CFH”) at market value of $96,000 and $104,000 as of June 30, 2012 and 2011, respectively. The Company owned 12.13% of the common stock of CFH as of June 30, 2012 and 2011, respectively, and accounts for this investment as a non-current asset.
In October 2006, PawnMart purchased 3,050,000 Series A Convertible Preferred Shares of CFH (the “Preferred Shares”), for a total of $1,525,000, which shares are convertible into 3,050,000 shares of common stock of CFH. In October 2011, PawnMart completed an exchange of its Preferred Shares in CFH for a secured promissory note in the amount of $1,300,000. The Company reported an unrealized gain in the amount of $225,000 in comprehensive income for the year ended June 30, 2011.
In March 2012, the promissory receivable note was amended for the remaining outstanding balance of $352,000. The amended promissory note receivable matures on April 1, 2014, and bears interest at a rate of 7% per annum and provided for a principal payment of $100,000 in April 2012 and quarterly payments of principal and interest of $34,000 to maturity beginning July 1, 2012. As of June 30, 2012, the outstanding balance on the secured promissory note receivable was $252,000.
In October 2006, PawnMart purchased a $950,000 convertible promissory note (the “Promissory Note”) from CFH. The Promissory Note bears interest at a rate of 6.5% per annum, payable semiannually, and was due to mature in October 2016. At any time after October 15, 2009, PawnMart may convert the Promissory Note into common shares, $0.0001 par value, of CFH at a price of $0.50 per share for each $0.50 of principal of the Promissory Note outstanding, subject to anti-dilutive adjustment. The Promissory Note was automatically convertible into common shares of CFH on the foregoing basis upon the earlier to occur of a sale of CFH or maturity of the Promissory Note.
On May 26, 2011, the Company negotiated a settlement in the amount of $715,000 in exchange for the Promissory Note. CFH paid PawnMart $640,000 cash plus a promissory note in the amount of $75,000. The $75,000 promissory note was to mature in May 2012 and bore interest at a rate of 6.5% per annum. CFH paid off the $75,000 promissory note receivable to PawnMart in September 2011.
The Company reported the investments in the Preferred Shares and the secured notes receivable on a fair value basis. The Company determined the value based on a negotiated exchange of the Preferred Shares by PawnMart for a secured promissory note in the amount of $1,300,000.
The Company recognized cumulative net unrealized losses of $638,000 and $855,000 to reflect the fair market value of this investment as of June 30, 2012 and 2011, respectively. The Company recorded a net unrealized gain of $218,000 and $289,000, respectively, to reflect the change in fair market value of this investment during 2012 and 2011.
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XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2012 and 2011
(12) Investments in Capital Financial Holdings, Inc. (Continued)
The table below summarizes the investments in CFH as of June 30, 2012 and 2011 (in thousands):
As of June 30, 2012
Common Stock
As of June 30, 2011
Common Stock Preferred Stock Total
(13) Commitments and Contingencies
$
$
Unrealized Cost Loss
734 $ (638)
Unrealized Cost Loss
734 $ (630) 1,525 (225)
Fair Value
$ 96
Fair Value
$ 104 1,300
$ 1,404
???????????????????????$ 2,259 $ (855)
??????The Company is obligated under various long-term operating lease agreements for store locations and office space. Total rent expense for all operating leases was approximately $2,465,000 and $1,916,000 for the years ended June 30, 2012 and 2011, respectively.
Future minimum lease payments under non-cancelable operating leases as of June 30, 2012 are (in thousands):
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter ........................................................... Total minimum lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company is involved in various claims and lawsuits arising in the ordinary course of business. Management is not aware of any claims or lawsuits which would have a material adverse effect on the Company’s consolidated financial position or results of operations.
(14) Related Party Transactions
Sanders Morris Harris, Inc. (“SMH”), a related party, employs Jeffrey A. Cummer as an officer of a subsidiary and executes security transactions for the Company. Mr. Cummer is also an officer and director of the Company.
As of June 30, 2012, the Company owned 12.13% of the common stock of Capital Financial Holdings, Inc. (“CFH”) PawnMart also owns a secured promissory note receivable with a balance outstanding as of June 30, 2012 of $252,000 (See Note 12).
A related party of an executive of the Company provides marketing and advertising services for the Company. Marketing and advertising fees paid to the related party were approximately $110,000 and $118,000 for the years ended June 30, 2012 and 2011, respectively.
$ 2,440 1,897 1,577 1,238 722 394
$ 8,268
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XPONENTIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements
June 30, 2012 and 2011 (14) Related Party Transactions (Continued)
Select Partners, Ltd., a related party in which Mr. Cummer is a partner was paid consulting services in the amount of $50,000 for each of the years ended June 30, 2012 and 2011, respectively. Gamma Partners LP, a limited partnership affiliated with Mr. Cummer, provided a loan in the amount of $2,750,000 (“Gamma Note”) to PawnMart, Inc., the Company’s wholly owned subsidiary (See Note 7).
An entity owned by Robert Schleizer, an officer and director of the Company was paid a total of $85,000 and $75,000 for consulting services for each of the years ended June 30, 2012 and 2011, respectively. A related party to the executive was paid a total of $2,000 and $3,000 for contract services for the each of the years ended June 30, 2012 and 2011, respectively.
(15) Employee Retirement Plan
The Company has adopted a plan known as the PawnMart, Inc. 401(k) Plan (the Plan) to provide retirement benefits for its employees. As allowed under Section 401(k) of the Internal Revenue Code, the Plan provides tax-deferred salary deductions for eligible employees.
Employees may contribute up to the maximum contributions as set periodically by the Internal Revenue Service. The Company does not match employee contributions.
(16) Subsequent Events
In July 2012, the Company amended its line of credit with FCC to provide for borrowings up to $12 million and extended the maturity until June 2015 including a $1.5 million term loan for capital expenditures which matures in January 2014 which requires monthly interest payments plus principal payments of approximately $83,000 beginning in September 2012.
In November 2012, the Company further amended its line of credit with FCC to increase the term loan to $1,756 million which matures in November 2014 which requires monthly interest payments plus principal payments of $73,000 beginning in December 2012. In addition, the amendment provides for a short term increase in advance rates on jewelry inventory and the cap on inventory advances to $3.5 million through February 2013 to facilitate acquisition of the assets of three pawn stores in the Atlanta, Georgia market.
In November 2012, PawnMart acquired the assets of three pawn stores, assuming the leases and operations of two of the locations in Roswell and Tucker, Georgia. The purchase was paid for with a cash payment of $1.13 million, a note payable to seller in the amount of $375,000 which provides for monthly payments of principal and interest of $12,000 beginning in December 2012, and 100,000 shares of the Company’s $0.01 par value common stock.
The Company evaluated subsequent events through March 7, 2013, when these financial statements were available to be issued. The Company is not aware of any significant events that occurred subsequent to the balance sheet date but prior to the issuance of this report that would have a material impact on the consolidated financial statements except as disclosed above.
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in the accompanying proxy will vote such proxy in accordance with their best judgment on any such matter. The persons named in the accompanying proxy will also, if in their judgment it is deemed advisable, vote to adjourn the Annual Meeting from time to time.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL SAVE THE EXPENSE OF FURTHER MAILING.
By Order of the Board of Directors,
Jeffrey A. Cummer, Chairman of the Board
?March 8, 2013