Kenneth Emmanuel Dyers is accused of molesting the girls after ordering them to strip as part of "energy conversion" meditation.
Dyers, who formed the Kenja organisation with his partner Jan Hamilton in 1982, claims to offer "greater spiritual understanding".
The group offers meditation sessions – known as "processing" or "energy conversion" – in which students and meditation consultants participate in one-on-one meetings.
It was during these energy conversions that Dyers allegedly molested the two young girls.
The WWII veteran yesterday faced a committal hearing in the Downing Centre Local Court, charged with 21 counts of aggravated indecent assault and one count of sexual intercourse without consent.
The offences allegedly occurred at the cult's Surry Hills premises between December 2001 and July 2002.
The mother of one alleged victim, who joined Kenja in 1988, told the court yesterday she noticed changes in her daughter's behaviour after the schoolgirl began weekly sessions with Dyers in 2001.
"She became erratic, extremely stressed," the woman, who cannot be identified, said.
At the time of the sessions, the 12-year-old had been made a "junior professional" in the cult.
"(A junior professional) is a child who counsels other children within the organisation," the woman said.
It was not until July 2002 that the girl revealed what had allegedly occurred during the processing sessions, her mother told the court.
She recalled a conversation with her daughter, in which the child told her: "I don't feel that what is happening in the sessions is OK."
"She said she was taken into a room where there wasn't a third person present and (Dyer) asked to take her clothes off and there was touching involved," the woman said.
The family officially cut ties with Kenja the following day.
Under cross-examination by Dyers' lawyer Graham Turnbull, the woman admitted her daughter was under stress for a variety of reasons.
The hearing continues.