SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NO. 2-70345-NY.
BUFFS-N-PUFFS, LTD.
(Exact name of Registrant as specified in its Charter)
Nevada 88-0182534
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
6500 South State Street
Murray, Utah 84107-7219
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(801) 268-9280
Former Address:
n/a
Former Name, Former Address, and Former Fiscal Year,
if changed since last report
Number of Shares Outstanding at the End of the Fiscal Quarter:
8,004,900 shares of common stock
(Indicate Number of Shares Outstanding of Each Class of Common
Stock as of the end of the Quarter)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filled by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes: X No:
(2) Yes: X No:
Page 1 of 15 consecutively numbered pages.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
Buffs-N-Puffs, Ltd. ("Registrant" or "Company") files herewith an unaudited
balance sheet of the Registrant as of June 30, 1996 and the related statements
of income and cash flows for the three month periods ended June 30, 1996 and
June 30, 1995. The unaudited financial statements included in this report on
Form 10-Q have been prepared by the Company and have not been the subject of
independent review. In the opinion of the management of the Company, the
financial statements fairly present the financial condition of the Company.
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<PAGE>
Buffs-N-Puffs, Ltd.
Consolidated Balance Sheet
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
CURRENT ASSETS 1996 1995
- --------------
---------------------- --------------------
<S> <C> <C>
Cash $228,553 $177,086
Receivables (Note E) 32,435 16,241
Marketable Securities (Notes) 240,783 220,317
Inventory (Note A) 20,079 26,525
Prepaid Expenses & Supplies 59,040 21,843
---------------------- --------------------
Total Current Assets 580,890 462,012
PROPERTY, PLANT AND EQUIPMENT (at cost)
Building Improvements 198,187 194,621
Building 1,494,000 0
Furniture, Fixture & Equipment 862,458 855,952
Land 891,185 310,185
---------------------- --------------------
3,445,830 1,360,758
Less Accumulated Depreciation (657,344) (608,943)
---------------------- --------------------
Total Property, Plant & Equipment 2,788,486 751,815
OTHER ASSETS
Startup Costs 46,769 49,757
Deposit 1,433 4,365
Montana Land 52,590 52,590
Deferred Tax Asset 128,000 128,000
---------------------- --------------------
Total Other Assets 228,792 234,712
---------------------- --------------------
TOTAL ASSETS $3,598,168 $1,448,539
====================== ====================
</TABLE>
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<PAGE>
Buffs-N-Puffs, Ltd.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS EQUITY
June 30, December 31,
CURRENT LIABILITIES 1996 1995
- -------------------
------------------------- -------------------
<S> <C> <C>
Accounts Payable, Payroll and Sales Tax $72,882 $48,923
Loan Payable 56,690 55,087
Loans Payable - Related Parties 163 14,149
Leases Payable 335,843 0
------------------------- -------------------
Total Current Liabilities 465,578 118,159
LONG TERM LIABILITIES
Loan Payable 110,691 136,612
Lease Payable 1,605,629 0
Loans Payable - Related Parties 0 0
------------------------- -------------------
Total Long Term Liabilities 1,716,320 136,612
------------------------- -------------------
Total Liabilities 2,181,898 254,771
Capital Stock, common 2,611 611
Additional paid in capital 1,243,691 1,120,692
Retained Earnings (deficit) 218,920 121,417
------------------------- -------------------
1,465,222 1,242,720
Less Treasury Stock (48,952) (48,952)
------------------------- -------------------
1,416,270 1,193,768
TOTAL LIABILITY AND STOCKHOLDERS EQUITY $3,598,168 $1,448,539
---------------------------------------
========================= ===================
</TABLE>
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<PAGE>
Buffs-N-Puffs, Ltd.
Consolidated Statement of Operations
(Unaudited)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For three months ended For six months ended
--------------------------------------- --------------------------------
June 30, June 30, June 30, June 30,
REVENUES: 1996 1995 1996 1995
- ---------
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Car Wash $390,257 $326,657 $733,534 $670,526
Boutique Net 8,703 7,432 15,779 14,036
Fuel Sales - Net 4,424 3,556 9,270 8,397
Carpet Express Equipment - Net 225 0 627 0
Discounts (2,835) (2,416) (4,935) (5,215)
--------------- ---------------- --------------- ----------------
TOTAL REVENUES 400,774 335,229 754,275 687,744
COSTS AND EXPENSES
Salaries, Labor and Commissions 175,958 145,331 326,243 298,802
Taxes and Benefits 22,969 19,461 48,762 45,173
Interest and Credit Card Fees 56,887 18,109 75,222 37,345
Travel, Auto, Promotional and Advertising 8,749 8,570 14,060 17,365
Office, Telephone, Printing and Supplies 41,189 34,305 76,763 71,836
Utilities, Maintenance, Rent and Insurance 21,920 51,426 64,277 108,552
Depreciation and Amortization 25,832 26,307 51,390 55,909
Professional Fees and Other 18,551 20,508 41,413 43,559
--------------- ---------------- --------------- ----------------
TOTAL COSTS AND EXPENSES 372,055 324,017 698,130 678,671
--------------- ---------------- --------------- ----------------
Net Income (Loss) before Other Income 28,719 11,212 56,145 9,073
Contract Services and Miscellaneous 1,533 2,429 2,432 (1,657)
Interest and Dividends 928 1,798 2,483 3,858
Gain (loss) on Sale of Securities 17,752 0 36,543 17,103
--------------- ---------------- --------------- ----------------
20,213 4,227 41,458 19,304
Income Taxes (100) (100) (100) (100)
NET INCOME $48,832 $15,339 $97,503 $28,377
=============== ================ =============== ================
NET INCOME PER SHARE $Nil $Nil $0.01 $Nil
=============== ================ =============== ================
</TABLE>
<PAGE>
Buffs-N-Puffs, Ltd.
Consolidated Statement of Stockholders Equity
(Unaudited)
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained Treasury Stock
Shares Amount Paid in $ Earnings Shares Amount
------ ------ --------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balances 12/31/92 6,113,900 611 1,120,692 (403,692) 109,000 (48,952)
--------- --- --------- --------- ------- --------
Net Income for year
ended 12/31/93 281,648
Balances 12/31/93 6,113,900 611 1,120,692 (122,044) 109,000 (48,952)
--------- --- --------- --------- ------- --------
Net Income for year
ended 12/31/94 109,604
Balances 12/31/94 6,113,900 611 1,120,692 (12,440) 109,000 (48,952)
--------- --- --------- -------- ------- --------
Net Income for year
ended 12/31/95 133,857
Balances 12/31/95 6,113,900 611 1,120,692 121,417 109,000 (48,952)
--------- --- --------- ------- ------- --------
Issue common stock 2,000,000 2,000 122,999 0 0 0
pursuant to property
purchase agreement
Net Income for 6
Months ended 6/30/96 97,503
Balances 6/30/96 8,113,900 2,611 1,243,691 218,920 109,000 (48,952)
========= ===== ========= ======= ======= ========
</TABLE>
-5-
<PAGE>
Buffs-N-Puffs, Ltd.
Consolidated Statement of Cash Flows
(Unaudited)
CASH FLOW STATEMENT
<TABLE>
<CAPTION>
For three months ended For six months ended
---------------------------------- ---------------------------------
OPERATING ACTIVITIES June 30 June 30 June 30, June 30,
1996 1995 1996 1995
---------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
Net Income $48,832 $15,339 $97,503 $28,277
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Write off Obsolete Assets 0 0 0 4,978
Depreciation and Amortization 25,832 26,307 51,390 55,909
(Increase) Decrease in Receivables (4,525) (3,758) (16,194) (637)
(Increase) Decrease in Pre-Paid Expense, (6,345) (7,488) (37,197) (3,712)
Supplies and Deposits
(Increase) Decrease in Inventory (1,347) 3,469 6,446 2,228
Increase (Decrease) in Accounts Payable and 11,456 6,460 23,959 130
Payroll Tax Payable
---------------- -------------- ----------------- -------------
NET CASH PROVIDED OPERATING ACTIVITIES 73,903 40,329 125,907 87,173
INVESTING ACTIVITIES
Land Purchase 0 0 (581,000) 0
Increase in Start Up Costs 0 (6,400) 0 (12,900)
Decrease in Deposits 0 0 2,932 0
Cost of Securities Sold 18,159 0 117,469 60,534
Purchase of Securities (15,374) 0 (137,935) (99,475)
Proceeds from Equipment Sale 0 4,000 0 4,000
Purchase of Property and Equipment (6,070) (9,591) (1,502,071) (23,028)
---------------- -------------- ----------------- -------------
NET CASH PROVIDED (USED) BY INVESTING (3,285) (11,991) (2,100,605) (70,869)
ACTIVITIES
FINANCING ACTIVITIES
Increase in Lomg Term Debt 3,727 0 1,953,727 0
Issue Common Stock 0 0 125,000 0
Repayment of Loans and Leases (13,003) (14,071) (52,562) (53,720)
---------------- -------------- ----------------- -------------
(9,276) (14,071) 2,026,165 (53,720)
INCREASE (DECREASE) IN CASH AND CASH 61,342 14,267 51,467 (37,416)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING 167,211 132,058 177,086 183,741
OF PERIOD
---------------- -------------- ----------------- -------------
CASH AND CASH EQUIVALENTS AT END OF $228,553 $146,325 $228,553 $146,325
PERIOD
================ ============== ================= =============
</TABLE>
-6-
<PAGE>
Buffs-N-Puffs, Ltd.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE A - Summary of Significant Accounting Policies
Revenue Recognition
Interest income is accrued as earned. Gains or losses on the sale of securities
are recorded as of the trade date.
Depreciation
Depreciation on office equipment and furniture is provided over the estimated
useful life of five to ten years using an accelerated method and depreciation on
the office building is being provided over the estimated useful life of 30 to
31.5 years using the straight line method.
Marketable Securities
Marketable securities, as a group, are carried at market value in accordance
with FAS #115. Prior to January 1, 1994, the securities were carried at the
lower of cost or market. At December 31, 1995, an increase of $10,207 was made
to adjust to market (9,666 decrease was made for 1994 and $1,789 decrease was
made for 1993).
Income Taxes
No federal income taxes were due for the year ended December 31, 1995. At
December 31, 1995, the Company had unused general business credits of $7,844
which expire in 1996 through 2000, and contributions carryover of $23,218,
expiring in 1998 through 2000. The Company has a capital loss carryover of
$14,340 which expires in 1997. The Company also has a net operating loss
carryover which if not used will expire as follows:
Amount Expiration Date
Year Ended Federal Utah Federal Utah
---------- ----------- -------- ---------- -------
12/31/90 $ 299,501 $ 0 12/31/05
12/31/91 123,837 123,637 12/31/06 12/31/96
------- ----------
$ 423,338 $ 123,637
========= =========
Inventory
Inventory consists of items for sale and use in the operations of the carwash.
Inventory is recorded at lower of cost or market, on a first-in, first-out
basis.
NOTE B - COMMITMENTS
The Company previously leased space in a building owned by a related party, (see
note H). The lease contained escalating previsions and was based on percentages
of gross monthly sales excluding fuel sales. During 1995, $112,643 was paid as
rent. On March 25, 1995 the Company purchased the building and land the carwash
is located on for $2,075,000.
The Company is also obligated under a maintenance contract on its electronic
sign. The contract was signed to be effective in January of 1991 and is three
years in length with monthly payments of $789. The contract was renewed in 1993
for an additional three years, through December 31, 1996. During 1994 the
Company paid $5000 for a 24 month lease on an automobile. The $5000 is being
charged to expense at a rate of $208 per month. The lease will expire in August
1996. The Company leased six radios in June of 1996 for a period of 1 year. The
total cost of the radios was $3,750.
-7-
<PAGE>
NOTE C - LOANS PAYABLE
On March 26, 1996 the Company entered into an agreement with Daniel F.
Pentelute, to purchase the carwash buildings and land. The company took out a
mortage of $1,800,000 and a line of credit of $150,000. In addition 2,000,000
shares of stock were issued to Mr. Pentelute at a price of 1/8 or $125,000. The
total purchase price was $2,075,000. The purchase price was below the appraised
value of 2,400,000 actual and $3,600,000 replacement cost. The loan agreements
were signed with Bank One, Utah. The 1,800,000 loan is a 20 year amortization
with a 5 year call at 8.26% interest. The line of credit is a 1 year renewable
term at 8.25% interest.
<TABLE>
<CAPTION>
Interest 1996 1995
---------------------------------- -----------------------------------
Rate % Current Long-Term Current Long-Term
------------- ------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
G. Phillip Condie* 7.50 50,000 95,000 $50,000 $145,000
Copelco 6.00 0 0 1,500 0
Escrow Services** 9.50 4,631 14,137 4,631 20,810
Dan Pentelute 8.75-10.5 163 0 40,548 0
Bank One 8.26 185,843 1,605,629 0 0
Bank One 8.26 150,000 0 0 0
------------- -------------- --------------- ------------------
$390,637 $1,714,766 $95,679 $165,810
============= =============== =============== ==================
</TABLE>
*Monthly payments of interest are $1,888 with principal payments of $25,000 due
March 1 and September 1 of 1994, 1995 and 1996 and the balance due by 9/1/1998.
This loan is secured by land with a cost of $310,185. This land was original
purchased for a second carwash location. The land is currently being offered for
sale.
**This loan relates to land purchased in Montana with Desert Land Enterprises.
It is anticipated that the property will be sold at a substantial profit in the
future.
Scheduled principal reductions for the next five years are as follows:
12/31/96 $ 242,106
12/31/97 92,106
12/31/98 87,106
12/31/99 42,106
Thereafter 1,641,979
---------
$ 2,105,403
NOTE D - DEFERRED TAX ASSET
In February, 1992, the Financial Account Standards board adopted Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes, which
supersedes substantially all existing authoritive literature for accounting for
income taxes and requires deferred tax balances to be adjusted to reflect the
tax rates in effect when those amounts are expected to become
-8-
<PAGE>
payable or refundable. The Statement is required to be applied in the Company's
financial statements for the calendar year commencing January 1, 1993 (earlier
application is permitted) either by restating prior-period financial statements
or by recognizing the cumulative effect of the change in the year of adoption.
The Company has decided to recognize the cumulative effect of the change during
1993. The following pro forma information reflects what the statements of
operations would have looked like if the deferred tax asset had been recognized
in 1991 and 1992.
1991
Income (loss) before cumulative effect of
recognizing a deferred tax asset. $ 39,534 $ (111,786)
Cumulative effect on prior years of
recognizing a deferred tax asset. (15,000) 169,000
---------- ------------
Adjusted net income $ 24,534 $ 57,214
---------- ------------
Earnings (loss) per share - originally .01 (.02)
Adjusted earnings per share .00 .01
If the above adjustments had been reflected in 1991 and 1992, the Company would
have recorded an income tax benefit of $44,000 in 1993 rather than $198,000. Net
income would have been $87,648 rather than $241,648 and earnings per share would
have been $.01 rather than $.05.
NOTE E - RECEIVABLES
Receivables at June 30, 1996 and 1995 consisted of the following:
March 31, March 31,
1996 1995
Trade accounts receivable $ 32,435 $ 26,805
------------ ------------
NOTE F - START-UP COSTS
Add: During 1994 and 1995 the Company spent 23,700 associated with property
being held for development into a second carwash operatiion. The Company has
offered this property for sale as of June 1, 1996. Costs will be amortized when
the property is sold.
NOTE G - STOCK OPTIONS
During 1991, options to purchase the Company's common stock were granted to
eight individuals who are or were officers, directors, employees and consultants
for the Company. A total of 610,000 share of stock may be purchased at a price
of $.09375 per share. The options must be exercised by July 31, 1996.
NOTE H - RELATED PARTY TRANSACTIONS
During 1990 Donna Anderson and Daniel Pentelute arranged for three loans by
pledging their personal assets. Some of the proceeds from these loans were made
available to the Company.
-9-
<PAGE>
The Company has been making the payments for these loans and the interest and
principal have been amortized according to the proceeds each party received.
On April 19, 1991, the Company entered into a five year lease with Daniel
Pentelute, the major shareholder of the Company. Under the lease Mr. Pentelute
received as rent four percent of the gross proceeds excluding gasoline sales
commencing on July 1, 1991, and continuing until April 1, 1992. At that time and
thereafter Mr. Pentelute will receive seven percent of the gross proceeds from
the carwash facility. On May 21, 1991, an addendum to the lease was entered into
providing for a five year option term at the end of the initial five year term.
The terms require a rent payment equal to 7% of monthly gross sales, excluding
gasoline sales with a minimum rent of $5,000 per month. In addition the Company
has an option to purchase the land and buildings at 6500 South State Street,
Salt Lake City, Utah, commencing at he end of the initial term and exercisable
at the anniversary date of the lease in each of the five years under the option
term. The purchase price of the property shall be determined by the sum of
$2,330,000 capitalized from April 1, 1990 to the date of closing at the rate of
four percent per annum. On March 25, 1996 a second addendum to the lease was
entered into by the parties, waiving the notice and earnest money provisions of
the lease. The addendum also modified the purchase price of the property to
$2,075,000. Subsequently, the property was purchased on March 29, 1996.
NOTE I - MONTANA LAND
During 1994, Daniel Pentelute, the major shareholder of the Company, purchased
21 acres of land in Montana and three (3) days later sold one-half interest to
the Company at his cost. The other one-half interest is owned by Desert Land
Enterprises, whose sole shareholder is Daniel Pentelute. It is anticapated that
the Company will be able to sell the land in the future at a substantial profit.
.
-10-
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND OPERATING RESULTS.
Changes in Financial Condition
At June 30, 1996 the Company had current assets of $580,890 compared to $462,012
as of December 31, 1995. Cash increased $51,467 for the six month period ended
June 30, 1996. The increase in current assets and cash are attributable to
increased profit by the Company. Current liabilities increased $347,419 from
$118,159 as of December 31, 1995 to $465,578 as of June 30, 1996. The increase
is attributable to loans used to purchase the carwash building and property.
Receivables increased $16,194 from $16,241 as of December 31, 1995 to 32.435 as
of June 30, 1996. The increase in attributed to current portion of loans used to
purchase the carwash building and property. Receivables increased $16,194 from
$16,241 as of December 31, 1995 to 32,435 as of June 30, 1996. The increase can
be traced to credit card receipts not received as of June 30, 1996.
Inventory decreased $6,446 from $26,525 as of December 31, 1995 to $20,079 as of
June 30, 1996. The decrease is mainly attributable to carrying fewer items in
the boutique/customer waiting area.
Changes in Results of Operations
Carwash volume increased 4,451 cars, or 20% from 21,769 for the three month
period ended June 30, 1995 to 26,220 for the same period ended June 30, 1996.
Volume has increased due to drier than normal spring weather patterns.
Revenue for the three month period ended June 30, 1996 was $400,774 compared to
$335,229 for the same period ended June 30, 1995, an increase of $65,545 or
19.5%.
During the three months ended June 30, 1996 costs and expenses were $372,055
compared to $324,017 for the same period ended June 30, 1995 and increase of
$48,038 or 14.8%. The increase is due to higher labor costs associated with
higher carwash volume, higher supplies costs, and increased interest expense due
to loans for the property purchases.
For the three months ended June 30, 1996 the Company posted a profit of $48,832
compared to $15,339 for the same period ended June 30, 1995 an increase of
$33,493 or 218%. For the six month period ended June 30, 1996 the company posted
a profit of $97,503 compared to $28,377 for the same period ended June 30, 1995
an increase of $69,126 or 244%. This increase in profits is due to higher
carwash profit and gains on securities sales. Net earnings per share were .01
for the period ended June 30, 1996.
As of June 30, 1996 cash and equivalents were $228,553 compared to $146,325 for
the same period ended June 30, 1995.
The current ratio as of June 30, 1996 was 1.24 compared to 2.50 as of June 30,
1995.
Management is confident that sufficient working capital exists for its
operations.
-11-
<PAGE>
PART II.
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Registrant has no securities which are reportable under this item.
ITEM 4. MATTERS SUBMITTED TO A VOTE OF THE COMPANY'S
SHAREHOLDERS
No matters were submitted to a vote of the Company's shareholders during this
quarter.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Buffs-N-Puffs, Ltd.
By: s\Alan R. Theis
Alan R. Theis
On Behalf of the Registrant
and as Secretary/Treasurer
and Chief Financial Officer
Dated July 31, 1996.
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000350133
<NAME> Buffs N Puffs
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 228,553
<SECURITIES> 240,783
<RECEIVABLES> 32,435
<ALLOWANCES> 0
<INVENTORY> 20,079
<CURRENT-ASSETS> 580,890
<PP&E> 3,445,830
<DEPRECIATION> 657,344
<TOTAL-ASSETS> 3,598,168
<CURRENT-LIABILITIES> 465,578
<BONDS> 0
0
0
<COMMON> 2,611
<OTHER-SE> 1,462,611
<TOTAL-LIABILITY-AND-EQUITY> 3,558,168
<SALES> 403,609
<TOTAL-REVENUES> 400,774
<CGS> 0
<TOTAL-COSTS> 372,055
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,598
<INCOME-PRETAX> 97,603
<INCOME-TAX> 100
<INCOME-CONTINUING> 97,503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,503
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
