SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period from ________ to ________
Commission file number 2-70345-NY
BUFFS-N-PUFFS LTD
(Exact name of registrant as specified in its charter)
Former name of registrant - PUBCOA, INC.
Nevada 88-0182534
(State or other jurisdiction of (IRS Employer ID Number)
incorporation of organization.)
6500 South State Street, Murray, Utah 84107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 268-9280
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of the
filing.
2,511,375 shares at $0.125 per share = $313,922 as of March 6, 1996
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
8,354,900 shares common stock par value $0.0001, excluding Treasury Shares
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(b) 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. YES [XX] NO [ ]
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PART I
ITEM 1. BUSINESS
Buffs-N-Puffs Ltd., formerly known as Pubcoa, Inc., (the "Company") was
incorporated under the laws of the State of Nevada on November 14, 1980. It has
engaged during the past sixteen (16) years in various business opportunities.
In 1990, the Company entered the carwash business. On March 22nd, 1990, the
Company's carwash operations started at 6500 South State, Murray, Utah. The
facilities have eight gas pumps and two tunnels. The first of these tunnels
houses carwash equipment which the Company believes is the best equipment
available in terms of cleaning the vehicles, reliability, and durability. In
this tunnel the Company offers a full range of services for automotive cleaning,
including the cleaning of the undercarriage and tires. The Company operations
are known as a full service carwash because of the many services it offers and
because the customer performs no service. The carwash operations is not a self
service nor a single station roll over wash. The second tunnel houses automotive
interior cleaning equipment which the Company has developed. With its unique
auto interior cleaning equipment the Company provides auto carpet and seat
upholstery cleaning services. The carwash building also has a boutique, which is
also the waiting room for customers. Windows allow customers to view the
equipment in operation. The boutique offers a wide range of convenience items
which include automotive products, convenience foods, and greeting cards.
The Company presently has approximately 35 full time and 30 part time
employees.
The carwash tunnel has the following equipment which is listed in the
sequence of the cleaning cycle:
1. Vacuums
2. Prep
- Chemical tire applicator (CTA) applies cleaning chemical to tires.
3. Tunnel
- Presoak Arch - applies cleaning chemical for tough dirt and road grime. -
Foamerator - Applies cleansing agent, with optical brightners.
Whippersnappers - Cleans car from side to side with soft cloths. -
Wrap-arounds - Cleans car front to back and side to side with soft cloth.
- Tire Brushes - Cleans tire sidewalls.
- Neon Super Sudsers - Applies concentrated cleaning foam.
- Whippersnappers - Cleans car from front to back with soft cloths.
- Undercarriage Wash - Removes soil from undercarriage of car.
- Set of 2x2's - Side wheel clothes to clean lower door panels.
- Tri - Color Wax Arch - applies three clearcoat waxes.
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- Wash Module - Whippersnappers and side wheel clothes (2nd set) for polish
wax.
- Rust Inhibitor - High pressure water with rust inhibitor applied to
undercarriage.
- Low volume rinse, wax arch - Rinses car exterior and applies sealer wax.
Booster nozzles side dryers - Air jets dry sides of car. - Infrared perform
air dryer - Complete forced air drying system.
4. Drying Area
- Wipe and Windows - Car is hand dried completely and windows are finished
off with a glass cleaning solution by hand.
- At the end of the tunnel is a large four bay drying area, where the wash
is completed and the customers pick up their cars.
5. Quality Control
- Manager inspects washed vehicles to assure that the service meets the
Company's standards.
- The Company recycles all water used in the carwash and reuses
approximately 80% of the water.
6. Services
The Company provides a variety of services ranging from a basic wash
package to a complete interior detail package.
Carpet Express
Carpet Express is a unique system that the Company developed to clean
automotive interiors, both carpeting and upholstery. The Carpet Express process
uses a combination of hot water, chemicals, and suction to wash, clean and
shampoo automotive carpets and upholstery. After the cleaning process the
interior is dry. Management believes that the Carpet Express process offers the
best available means, on a commercial scale, to clean automotive carpet and
upholstery. Carpet Express offers to a full service carwash additional services
to market to customers thereby increasing sales dollars per vehicle.
The carwash has used the Carpet Express system and process for cleaning
automotive interior carpeting and upholstery since the carwash facilities were
opened in March of 1990. The Company's experience during fiscal 1995 was that
approximately 5% of the carwash customers purchased the Carpet Express service
and these services accounted for approximately 12% of revenues.
The equipment used in the carpet and upholstery system is unique to the
Company and, in management's opinion, is superior to any equipment available to
clean automotive interiors on a commercial scale in the carwash environment.
During 1991 the Company introduced the Carpet Express system to the carwash
industry. A demonstration unit was manufactured and shown at the annual
International Carwash Association show in Chicago. Several leads were developed
although the Company was unable
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to sell any of the systems. Due to continued resistance from Carwash operators
over the cost of the system, the Company sought to revise the package. During
late 1992 and early 1993 production agreements were reached with CFR Corp. to
manufacture cleaning machines for Carpet Express. Based upon continued price
resistance the Company received from perspective clients in early 1994, the
agreement with CFR Corp. to manufacture the Carpet Express machines was
terminated. A new agreement was reached with Century 400, Inc. to manufacture
machines for the Company. The new machine has a significantly reduced selling
price, along with being easier to maintain. Blue Coral Systems supplies and
distributes cleaning solutions for the machines. The Company is the exclusive
distributor of the machines for the Carwash and Detail industries. During 1996,
the company and Blue Coral systems terminated the distribution agreements for
the Carpet Express System. The company sold no new systems during 1996. Sales
for the year consisted entirely of replacement parts. The company is no longer
actively marketing the Carpet Express system.
Lease and Facility
The Company leased, from a company controlled by Daniel Pentelute, the
majority shareholder of the Company, the land and buildings at 6500 South State,
Murray, Utah, until March of 1996, at which time the company purchased the
property. Two buildings are located on the property, each with a drive through
tunnel. The buildings are attractive and are well maintained. The property is
well landscaped and the environment created seeks to project a positive, clean,
and professional image. In the full service carwash industry the Company's
buildings and grounds have been shown as model facilities and have been used in
advertising by those firms which participated in the development of the
facilities.
The larger of the two buildings houses the boutique, carwash tunnel and
offices. Its dimensions are approximately 192 feet by 65 feet. The office space
on the second floor of the building is comprised of approximately 4000 square
feet. There is a reception area, day room facilities, storage rooms, and six
offices. The second building houses Carpet Express operations and is
approximately 3500 square feet. Inside it are a drive through tunnel, two
offices, and an equipment room.
The property on which the two buildings sit is approximately 3.5 acres. The
facilities are visible from the major beltway in Salt Lake County and from a
major thoroughfare which passes by the front of the property. The daily car
count for the major thoroughfare at the front of the property is approximately
37,000 cars per twenty-four hour period.
The Company's carwash targets the upper-middle class market. Most of the
cars washed are late model, more expensive vehicles. The customer ratio is
approximately 50-50 male and female. The Company believes that a high ratio of
its customers are women because of the aesthetic appeal of the buildings and
grounds. At carwash conventions the Company's carwash
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has been shown as an example of the work product of some of the participants in
the construction of the carwash facilities.
Competition
In the Greater Salt Lake area there are approximately 160 carwashes, known
as rollovers, located at gas stations. A rollover is a system of three rotating
brushes that simultaneously wash the top and sides of the vehicle. The major gas
companies offer free carwashes with gas purchases.
In the area are nine other full service washes, which compete directly with
the Company. It is believed the Company has a better location, superior
equipment, more aesthetic facilities, and better services to offer its customers
than the competition. The Company has no meaningful data as to the size of the
carwash market or the Company's share in that market.
In addition, competition comes from coin operated self service washes. In
the area there are approximately thirty-four coin operated carwashes. Also
locally there are two mechanical touchless rollover operations. The vehicles are
cleaned chemically without brushes.
Management believes its operations will mature with time as its facility
and services become better known and more recognized by the motoring public. The
overall market for the Company's services is imprecise. Management believes that
the single biggest determinant of sales volume is the weather. If the weather is
stormy or overcast, business declines. With good weather, sales increase
dramatically.
Inflation and Foreign Exchange.
Management believes that inflation and foreign exchange rates have no
effect on its operations or profits.
ITEM 2. PROPERTIES
The Company had a five (5) year lease on the buildings and real estate
housing its carwash operations and corporate headquarters. The Lessor, Pentelute
Properties, is an entity owned by Daniel F. Pentelute, the majority shareholder
of the Company. The lease is what is referred to as a triple net lease, as the
Company is responsible for all costs associated with the property as well as
rental payments. The monthly payments to the Lessor commenced on June 1, 1991,
and are on a percentage basis. Initially, rent was four per cent of the gross
sales, excluding fuel sales. On April 1, 1992, the monthly percentage increased
to seven per cent (7%) with a minimum amount of $5,000 per month. In April 1992
the lease was amended to correct a provision that had mistakenly placed
responsibility for property taxes on the Lessor. The Company maintains its
corporate headquarters on the premises. The two buildings housing the carwash
and Carpet Express tunnels sit on approximately 3.5 acres of land. Under the
lease the Company provides
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two offices to the Lessor. In addition, under the lease the Company had an
option to renew the lease for an additional five year term at a monthly rental
of seven per cent (7%) of monthly gross proceeds excluding fuel sales with a
minimum rent of $5,000 monthly. Also, the lease granted the Company an option to
purchase the property commencing at the end of the initial five year term. The
Company could exercise the option any year on the anniversary date of the lease
in the five year option term. The purchase price was $2,330,000 capitalized at
four per cent (4%) per annum from April 1, 1990. This price was renegotiated to
$2,075,000 in March 1996 when the property was purchased.
On March 25,1995, the Company purchased the building and the land the
carwash is located on for $2,075,000.The purchase was financed through Bank One
of Utah and consists of the following: A one year renewable line of credit of
$150,000 dollars at 8.25%, and a $1,800,000 note with a twenty year amortization
and five year call at 8.26%. In addition, the Company issued 2,000,000 shares of
common stock to Mr. Pentelute at a price of 1/8.
On June 21, 1993, the Company purchased approximately 1.67 acres of land
located at approximately 3750 West 4700 South, West Valley City, Utah. The
property was purchased for the specific purpose of building a second carwash for
the Company. This particular piece of property was purchased because of the high
traffic counts surrounding it and its location in an area which is not being
served by any other full service carwash. To this point in time, architectural
designs have been prepared but no construction has begun on said property.During
1996, the Company abandoned plans to build a second carwash on this site. The
property is currently under contract to be sold. It is anticipated the sale will
close before April 30, 1997.
The property was purchased for $310,000 of which $270,000 was financed at
7.5% interest. The Company makes interest only payments on a monthly basis and,
pursuant to the trust deed securing the property, principal must be reduced by
$25,000 on March 1 and September 1 of each year through 1996. The entire unpaid
balance, at that point in time, is due in full on or before September 1, 1998.
During September, 1994, Daniel Pentelute, the major stockholder of the
Company, purchased 21 acres of land in Montana. Three days later the Company
purchased a one half interest in this land from Mr. Pentelute at his cost. The
other one half interest is owned by Desert Land Enterprises, whose sole
shareholder is Daniel Pentelute. The cost of the one half interest was $52,590
of which the Company still owed $17,356 as of December 31, 1995. Monthly
payments on the land are $1,162 and the loan is secured by the land. It is
anticipated by the Company that it will be able to sell the land in the future
at a substantial profit.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended 1996, no matters were submitted by the Company for a
vote to its security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK & RELATED SHAREHOLDERS MATTERS.
The Company's common stock is traded in the over the counter market.
Previously the Company's common stock traded on the NASDAQ system under the
symbol BUFS. In March, 1992 the Company's securities were de-listed from the
NASDAQ system because of the inability to comply with new criteria. The
information below, since the end of the first quarter of 1992, was provided by
Alpine Securities of Salt Lake City, Utah and does not necessarily represent
prices of actual sales of the Company's common stock, nor does it take into
account any brokerage discounts, commissions, or fees. At the close of business
on March 7, 1996 the Company had approximately 645 stockholders of record.
<TABLE>
<CAPTION>
QUARTER HIGH BID HIGH ASK LOW BID LOW ASK
------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
First 1996 1/8 1/2 1/8 1/2
Second 1996 1/8 1/2 1/8 1/2
Third 1996 1/8 1/2 1/8 1/2
Fourth 1966 1/8 1/2 1/8 1/2
First 1995 3/4 1/2 1/64 1/8
Second 1995 1/2 1/2 1/64 1/64
Third 1995 1/2 3/8 1/64 1/64
Fourth 1995 3/8 3/8 1/8 1/8
First 1994 1/8 3/8 1/8 3/8
Second 1994 1/8 3/8 1/8 3/8
Third 1994 1/8 3/8 1/8 3/8
Fourth 1994 1/8 3/8 1/8 3/8
First 1993 3/32 7/32 3/32 7/32
Second 1993 1/8 3/8 1/8 3/8
Third 1993 3/16 1/2 3/16 1/2
Fourth 1993 1/4 3/4 1/4 3/4
</TABLE>
No dividends have been paid nor are any anticipated in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
--------------- --------------- --------------- ------------------ -----------
Total
<S> <C> <C> <C> <C> <C>
Revenues $ 1,510,079 $ 1,544,118 $ 1,633,892 $ 1,444,466 $ 1,112,921(1)
Net
Operating
Revenues 142,531 195,957 117,704 83,748 39,754
Net Income
from
continuing
operations 142,531 195,957 117,704 83,748 39,754
Net Income 107,831 133,857 109,604 281,648(2) 39,534
Total
Assets 3,575,179 1,448,539 1,503,992 1,472,827 912,594
Total
Stock-
holders'
Equity 1,459,410 1,193,768 1,108,863 950,307 668,659
Long Term
Debt 1,857,178 136,612 203,551 285,149 129,268
</TABLE>
NOTES
(1) Because of certain changes in 1993, certain revenues for 1992 have been
reclassified as other income rather than revenues, thus decreasing total
revenues for 1992. The income statements for 1992 have been reclassified to
be consistent with the income statement of 1993.
(2) In February, 1992 the Financial Accounting Standards Board adopted a new
standard which requires that deferred tax balances be adjusted to reflect
the tax rates in effect when those amounts are expected to become payable
or refundable. This statement was required to be applied in the company's
financial statements for the year 1993.
The company was given the choice of either restating prior period financial
statements or recognizing the cumulative effect of the change in 1993. The
company chose to recognize the cumulative effect of the change during 1993. Had
the company chose to make the adjustments in 1991 and 1992 rather than totally
in 1993, the net income of the company would have been
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$87,648 in 1993 rather than $241,648, earnings per share would have been $.01,
rather than $.05. In addition, the net income in 1992 would have been $24,534
rather than $39,534.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS
On March 22, 1990, the Company commenced its carwash operation at 6500
South State Street, Salt Lake City, Utah. Previously, the Company had not
engaged in any meaningful business operations and the Company had no revenues
generated from business operations.
1996 to 1995
As of December 31,1996 the Company had cash of $225,496 compared to cash of
$177,086 as of December 31,1995, an increase of $48,410 (27%). The increase is
attributable to profits from stock sales.
Current assets as of December 31, 1996 were $654,363 compared to $462,012
as of December 31, 1995 an increase of $192,351 (42%). Property, plant, and
equipment were $2,729,406 as of December 31, 1996 compared to $751,815 as of
December 31, 1995 an increase of 1,977,591 (263%). The increase of $1,977,591 is
attributable to the purchase of the buildings and the land the carwash is
located on.
Current Liabilities as of December 31, 1996 were $258,591 compared to
$118,159 as of December 31,1995, an increase of $140,432 (118%). Long term
liabilities increased from $136,612 as of December 31, 1995 to $1,857,178 as of
December 31, 1996, an increase of $1,720,566 (1,259%). The increase is due to
loans for the purchase of the carwash facilities. Total liabilities as of
December 31, 1996 were $2,115,768 compared to $254,771 as of December 31, 1995.
Stockholders' Equity as of December 31, 1996 was $1,459,410 compared to
$1,193,768 as of December 31,1995, an increase of $265,642 (22%). This increase
is attributable to operating profits and purchase of common stock by present and
former offices of the Company.
Total revenues for the year ended December 31, 1996 were $1,510,079
compared to total revenues of $1,554,118 as of December 31, 1995. Total revenues
decreased $44,039 (- 2.8%). This decrease is attributable to lower express
detail service sales and slightly lower carwash volume.
Total costs and expenses for the year ended December 31, 1996 were
$1,496,360 compared to $1,390,363 for the year ended December 31, 1995. Total
costs and expenses increased $105,997, or approximately 7.6%. Interest expenses
were substantially higher due to loans for the purchase of the carwash building
and land. Salary Expenses continue to rise due to the increase in minimum wage
and the extremely light labor market in Salt Lake,(around 3% unemployment). With
another raise in the minimum wage in 1997, and Utah's rapidly
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expanding economy, management expects wages to continue to rise. Net income
(before income tax benefit) for the year ending December 31, 1996 was $142,531
compared to $195,957 as of December 31, 1995, a decrease of $53,426 or 27%. The
net income per share of the Company's common stock for 1996 was .01 compared to
a net income of .02 per share in 1995. The current ratio of the Company as of
December 31, 1996 was 2.53 compared to 3.91 as of December 31,1995.
Management believes the carwash has reached a level of maturity, in which
volume will be fairly stable at 100,000+ cars per year. Management also believes
it will be difficult to increase per car revenues above current levels,
therefore the expenses of the operation must be reduced. As of December 31, 1996
the Company had on order additional drying equipment, to further dry the
vehicles on line, thereby reducing labor costs. In addition, the whip across and
wrap arounds were being replaced with updated designs which clean more
effectively. It is anticipated that a spot free rinse system will be installed
during the first half of 1997. Spot free rinse will further reduce the labor
costs by making the drying equipment more effective. Management is discussing
raising prices to further offset labor costs.
1995 to 1994
As of December 31, 1995 the Company had cash of $177,086 compared to cash
of $183,741 as of December 31, 1994, a decrease of $6,655 (3.6%). The decrease
is attributable to the Company's decreased revenue.
Current assets as of December 31, 1995 were $462,012 compared to $382,718,
an increase of $79,294 (20.7%). Property, plant, and equipment were $751,815 as
of December 31, 1995 compared to $834,024 as of December 31, 1994, a decrease of
$82,209 (9.8%). The decrease is mainly attributable to normal depreciation
expense.
Current liabilities as of December 31, 1995 were $118,159 compared to
$170,205 as of December 31, 1994, or a decrease of $52,046 (30.6%). Long term
liabilities decreased from $203,551 as of December 31, 1994 to $136,612 as of
December 31 ,1995, a decrease of $66,939 (32.9%). Total liabilities as of
December 31, 1995 were $254,771 compared to $373,756 as of December 31, 1994, a
decrease of $118,985 (31.8%). Total liabilities decreased due to lower accounts
payable and continuing reduction of debt.
Stockholders' Equity as of December 31, 1995 was $1,193,768 compared to
$1,059,911 as of December 31, 1994, an increase of $133,857 (12.6%). This
increase is primarily attributable to profits from operations, and the dismissal
of the Murray City lawsuit.
Total revenues for the year ended December 31, 1995 were $1,554,118
compared to total revenues for the year ended December 31, 1994 of $1,633,892.
Total revenues decreased by $79,774, or an approximate 4.9% decrease when
compared to the previous year. The primary reason for this decrease is the
decrease in the number of cars being serviced at the carwash due
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to weather conditions, and lower Carpet Express equipment sales. The drop in
carwash volume was partially offset by a price increase in carwash services.
Total costs and expenses for the year ended December 31, 1995 were $1,390,363
compared to costs and expenses of $1,540,497 for the year ended December 31,
1994. Total costs and expenses decreased by $150,134 or an approximate decrease
of 9.8% when compared to the previous year. The primary reason for the decrease
in costs and expenses was the decrease in labor due to equipment upgrades and
changing chemicals used in the carwash process. The net income (before income
tax benefit) for the year ended December 31, 1995 was $195,957 compared to net
income for the year ended December 31, 1994 of $117,704, or an increase of
$78,253, an approximate 66.5% increase. The net income per share of the
Company's common stock for 1995 was $.02 per share compared to a net income of
.02 per share in 1994. The current ratio of the Company as of December 31, 1995
was 3.91 compared to the current ratio as of December 31, 1994 of 2.24. This is
primarily the result of the profitability of the Company for the 1995 year.
Management intends to increase revenues and volume by continuing to offer
the highest quality service in the carwash business. Further cost reduction is
anticipated due to continuing updating of carwash equipment and chemical
applications. A price increase instituted in March of 1995 appears to have had
little effect on carwash volumes, while increasing profitability. It is
anticipated that profitability will increase further with the price increase in
effect for the full year.
1994 to 1993
As of December 31, 1994, the Company had cash of $183,718 compared to cash
of $130,377 as of December 31, 1993, an increase of $53,364 (40.9%). This
increase in cash was primarily the result of the Company's increased revenue.
Current assets as of December 31, 1994 were $382,718 compared to $312,458,
an increase of $70,260 (22.5%), again primarily due to the increase in the
Company's revenues and net income. Property, plant and equipment were $834,024
as of December 31, 1994 compared to $921,427 as of December 31, 1993 or a
decrease of $87,403 (9.5%). This decrease is primarily attributable to normal
depreciation expense.
Current liabilities as of December 31, 1994 were $170,205 compared to
$167,046 as of December 31, 1993 or an increase of $3,159 (1.9%). Long-term
liabilities also decreased from $285,149 as of December 31, 1993 to $203,551 as
of December 31, 1994. Total liabilities as of December 31, 1994 were $373,756
compared to $452,195 as of December 31, 1993 or an decrease of $78,439(17.3%)
The decrease in long-term liabilities were primarily caused by the reduction of
long term debt.
Stockholders' equity as of December 31, 1994 was $1,059,911 compared to
$950,307 as of December 31, 1993 or an increase of $109,604, which is
approximately 11.5%. This increase is attributable to profits from operations.
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Total revenues for the year ended December 31, 1994 were $1,633,892
compared to total revenues of $1,444,466 for the year ended December 31, 1993.
Total revenues increased by $189,426 or an approximate thirteen percent (13%)
increase when compared to the year earlier. Total costs and expenses for the
year ended December 31, 1994 were $1,540,497 compared to $1,379,336 for the year
ended December 31, 1993 or an increase of $161,161 (approximately 11.7%). The
increase in revenues primarily resulted from the increase in the number of cars
that were serviced by the Company. This results from the Company's maturing
process, the public becoming more acquainted with the Company and its location,
and favorable weather factors. The increase in costs and expenses primarily
results from the Company's increase in revenues which requires additional labor,
additional percentage rent, and related expenses. The net income (before income
tax benefit) for 1994 was $117,704 versus $83,748 for the year of 1993 or an
increase of $33,956 (approximately 40.5% increase). The net income per share of
the common stock for 1994 was $.02 per share, including the income tax benefit
described above, versus a net income in 1993 of $.05 per share. As discussed in
Note D, in the financial statements attached hereto, in February, 1992, the
Financial Accounting Standards Board adopted a new standard numbered 109 which
required that all deferred tax balances be adjusted to reflect the tax base in
effect when those amounts are expected to become payable or refundable. This
statement was required to be applied in the Company's financial statements for
the calendar year commencing January 1, 1993 and the Company chose to recognize
the cumulative effects of the change during the year of 1993. Because of this
reason, an adjustment was made to the 1993 income thereby increasing it in the
amount of $197,900 and thereby increasing the 1993 net income to $281,648. Had
said benefit been recognized in 1991, 1992 and 1993 the net income for 1993
wouldhave been $.01 per share rather than $.05 per share. This is primarily the
result in the increased revenues of the Company and the aforementioned income
tax benefit. The current ratio of the Company as of December 31, 1994 was 2.24
versus the current ratio as of December 31, 1993 of 1.87. This is primarily a
result of the profitability of the Company for the 1994 year.
1993 to 1992
As of December 31, 1993, the Company had cash of $130,377 compared to cash
of $42,756 as of December 31, 1992, a increase of $87,621. This increase in cash
was primarily the result of the Company's increased revenue and increased net
income.
Current assets as of December 31, 1993 were $312,458 compared to $172,023,
a increase of $140,435 again primarily due to the increase in the Company's
revenues and net income. Property, plant and equipment were $921,427 as of
December 31, 1993 compared to $693,348 as of December 31, 1992 or a increase of
$228,079 primarily due to the acquisition of land, during 1993, for an
additional carwash.
Current liabilities as of December 31, 1993 were $167,046 compared to
$114,667 as of December 31, 1992 or an increase of $52,379. Long-term
liabilities also increased from $129,268 as of December 31, 1992 to $285,149 as
of December 31, 1993. Total liabilities as of December 31, 1993 excluding a
contingent liability explained under Item III (Legal Proceedings),
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were $452,195 compared to $243,935 as of December 31, 1992 or an increase of
$208,260. The increases in current and long-term liabilities were primarily
caused by the acquisition of aforementioned land and the debt associated
therewith.
Stockholders' equity as of December 31, 1993 was $950,307 compared to
$668,659 as of December 31, 1992 or an increase of $281,648 which is
approximately a forty two percent (42%) increase. This increase is attributable
to profits from operations, as well as the Accounting changes referred to in
Note 2 above.
Revenues for the year ended December 31, 1993 were $1,444,466 compared to
total revenues of $1,112,921 for the year ended December 31, 1992. Total
revenues increased by $331,545 or a thirty percent (30%) increase when compared
to the year earlier. Total costs and expenses for the year ended December 31,
1993 were $1,379,336 compared to $1,084,955 for the year ended December 31, 1992
an increase of $294,381. The increase in revenues primarily resulted from the
increase in the number of cars that were serviced by the Company. This results
from the Company's maturing process, the public becoming more acquainted with
the Company and its location, and favorable weather factors. The increase in
costs and expenses results from the Company's increase in carwash volume,
leading to higher rent expense, labor costs and chemical costs. The net income
for 1993 was $83,748 versus $39,754 for the year of 1992. After the change in
accounting rules to reflect the income tax benefit discussed above, the net
income in 1993 was $281,648 versus $39,534 for 1992 or an increase of $242,114.
Net income per share of the common stock for 1993 was $.05 per share versus a
net income of .01 per share in 1992. This is primarily the result in the
increased revenues of the Company. The current ratio of the Company as of
December 31, 1993 was 1.87 versus the current ratio as of December 31, 1992 of
1.50. This is primarily caused by the profitability of the Company for the 1993
year.
LIQUIDITY AND CAPITAL RESOURCES.
Operations.
As of December 31, 1996, the Company's working capital was $593,103 and
included cash and cash equivalents of $395,772 as compared with $343,853 in
working capital and $177,086 in cash and cash equivalents at December 31, 1995.
During the three years ended December 31, 1996, the cash provided by operating
activities more than offset the amount of cash used in the Company's operating
activities. The net cash provided by operating activities in these three periods
were $297,540 in 1996, $244,338 in 1995, $264,592 in 1994. The Company does not
anticipate any significant change from the positive cash provided by operating
activities during 1997.
13
<PAGE>
Investing Activities.
The net cash used by the Company's investing activities increased from
$105,948 in 1994 to $141,632 in 1995, to $187,070 in 1996. The primary use of
cash for investing activities has been additional purchase of publicly traded
stock, and purchase of property and equipment.
Financing Activities.
The cash used by the Company's financing activities was $105,280 in 1994,
$109,361 in 1995 and $62,060 in 1996. The primary use of cash for financing
activities has been the reduction in the Company's long term debt.
Expansion Program.
During 1993 the Company acquired land in the western area of the Salt Lake
Valley to use for the purpose of a second carwash location. During 1996 the
Company decided to abandon plans for another facility, due to high construction
costs and the difficulty of obtaining financing. The property is currently under
contract to be sold. It is anticipated that this sale will be completed during
the second quarter of 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
(On following pages)
14
<PAGE>
C O N T E N T S
(a) 1. Financial Statements
The following Financial Statements of BUFFS-N-PUFFS, LTD.
are included in PART II, ITEM 8:
Page
INDEPENDENT AUDITOR'S REPORT..............................................16
FINANCIAL STATEMENTS:
BALANCE SHEETS -
December 31, 1996 and 1995 ...............................................17
STATEMENTS OF OPERATIONS -
years ended December 31, 1996, 1995 and 1994 .............................19
STATEMENTS OF STOCKHOLDERS' EQUITY -
years ended December 31, 1996, 1995 and 1994 ............................20
STATEMENTS OF CASH FLOWS -
years ended December 31, 1996, 1995 and 1994 ............................21
NOTES TO THE FINANCIAL STATEMENTS ........................................22
(a) 2. Financial Statement Schedules
The following financial statement schedules of BUFFS-N-PUFFS,
LTD. are included in PART IV, ITEM 14(d) (3):
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY FINANCIAL INFORMATION ..................................32
SCHEDULE I - MARKETABLE SECURITIES .......................................33
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT ...............................34
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT ...........................35
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
15
<PAGE>
Smith & Company
Certified Public Accountants
10 West 100 South, #700 Telephone: 801-575-8297
Salt Lake City, UT 84101 Facsimile: 801-575-8306
- ------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Buffs-N-Puffs, Ltd.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Buffs-N-Puffs, Ltd. as of
December 31, 1996 and 1995 and the related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1996, 1995
and 1994. These 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Buffs-N-Puffs, Ltd. at December
31, 1996 and 1995 and the results of its operations and its cash flows for the
years ended December 31, 1996, 1995 and 1994 in conformity with generally
accepted accounting principles.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 11, 1997
16
<PAGE>
BUFFS-N-PUFFS, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1996 1995
----------------- -----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 225,496 $ 177,086
Accounts receivable - trade 15,722 16,241
Marketable securities, at market value (Note A
and Schedule I) 343,232 220,317
Inventory (Note A) 18,834 26,525
Prepaid expenses and supplies 51,079 21,843
----------------- -----------------
TOTAL CURRENT ASSETS 654,363 462,012
PROPERTY, PLANT AND EQUIPMENT (at cost) (Note A and Schedules V and VI):
Building 1,494,000 0
Building improvements 198,187 194,621
Furniture, fixtures and equipment 877,402 855,952
Land 891,185 310,185
----------------- -----------------
3,460,774 1,360,758
Less accumulated depreciation 731,368 608,943
----------------- -----------------
2,729,406 751,815
OTHER ASSETS
Start-up costs (Note D) 43,987 49,757
Deposit 1,433 4,365
Montana Land (Note F) 52,590 52,590
Deferred tax asset (Note C) 93,400 128,000
----------------- -----------------
191,410 234,712
----------------- -----------------
$ 3,575,179 $ 1,448,539
================= =================
</TABLE>
See notes to the financial statements.
17
<PAGE>
BUFFS-N-PUFFS, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1996 1995
----------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable and payroll and sales taxes $ 54,792 $ 48,923
Loans payable (Note B) 203,636 55,087
Loans payable - related parties (Note B) 163 14,149
----------------- -----------------
TOTAL CURRENT LIABILITIES 258,591 118,159
LONG-TERM LIABILITIES:
Loans payable (Note B) 1,857,178 136,612
----------------- -----------------
1,857,178 136,612
----------------- -----------------
TOTAL LIABILITIES 2,115,769 254,771
STOCKHOLDERS' EQUITY:
Capital stock, common, authorized 100,000,000 shares of $0.0001 par value;
issued 8,463,900 shares, including 109,000 shares
of treasury stock, outstanding 8,354,900 846 611
Additional paid-in capital 1,278,268 1,120,692
Retained earnings 229,248 121,417
----------------- -----------------
1,508,362 1,242,720
Less Treasury stock - at cost (109,000
shares) (48,952) (48,952)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 1,459,410 1,193,768
----------------- -----------------
$ 3,575,179 $ 1,448,539
================= =================
</TABLE>
See notes to the financial statements.
18
<PAGE>
BUFFS-N-PUFFS, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
----------------- ----------------- -----------------
REVENUES:
<S> <C> <C> <C>
Carwash $ 1,470,372 $ 1,514,958 $ 1,588,853
Boutique sales - net 32,565 30,005 25,202
Fuel sales - net 16,907 18,687 17,798
Carpet express equipment sales - net 601 1,205 13,442
Discounts (10,366) (10,737) (11,403)
----------------- ----------------- -----------------
TOTAL REVENUES 1,510,079 1,554,118 1,633,892
COSTS AND EXPENSES:
Salaries, labor and commissions 679,071 648,770 737,315
Taxes and benefits 111,455 113,251 120,081
Interest and credit card fees 193,049 76,661 73,958
Travel, auto, promotional and
advertising 28,457 39,293 26,812
Office, telephone, printing and
supplies 186,170 184,933 180,040
Utilities, building maintenance,
rent and insurance 141,964 177,714 256,954
Depreciation and amortization 133,508 105,420 110,002
Professional fees and other 22,686 44,321 35,335
----------------- ----------------- -----------------
TOTAL COSTS AND EXPENSES 1,496,360 1,390,363 1,540,497
----------------- ----------------- -----------------
NET INCOME BEFORE OTHER 13,719 163,755 93,395
OTHER INCOME (EXPENSE)
Contract services and miscellaneous 4,112 2,260 20,910
Interest and dividends 7,436 7,218 5,162
Loss on equipment sales (2,277) (4,978) 0
Gain (loss) on sale of securities (cost
determined by specific identification) 151,090 17,495 7,903
Adjustment of securities to market (31,549) 10,207 (9,666)
------------------ ----------------- -----------------
128,812 32,202 24,309
----------------- ----------------- -----------------
NET INCOME
BEFORE TAXES 142,531 195,957 117,704
INCOME TAXES (BENEFIT)
(Notes A & C) 34,700 62,100 8,100
----------------- ----------------- -----------------
NET INCOME $ 107,831 $ 133,857 $ 109,604
================= ================= =================
NET INCOME PER SHARE OF
COMMON STOCK (based on
weighted average number
of shares outstanding) $ .01 $ .02 $ .02
================= ================= =================
Weighted average number of common
shares used to compute net income
per weighted average share 7,811,609 6,113,900 6,113,900
================= ================= =================
</TABLE>
See notes to the financial statements.
19
<PAGE>
BUFFS-N-PUFFS, LTD. AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit)
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balances 12/31/93 6,113,900 $ 611 $ 1,120,692 $ (122,044)
Net income for
year ended 12/31/94 109,604
----------------- ---------------- ----------------- -----------------
Balances 12/31/94 6,113,900 611 1,120,692 (12,440)
Net income for
year ended 12/31/95 133,857
----------------- ---------------- ----------------- -----------------
Balances 12/31/95 6,113,900 $ 611 $ 1,120,692 $ 121,417
Net income for
year ended 12/31/96 107,831
Stock issued for assets 2,000,000 200 124,800
Restricted stock issued
to employees 350,000 35 32,776
----------------- ---------------- ----------------- -----------------
Balances 12/31/96 8,463,900 $ 846 $ 1,278,268 $ 229,248
================= ================ ================= =================
</TABLE>
See notes to the financial statements.
20
<PAGE>
BUFFS-N-PUFFS, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
--------------- -------------- ---------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 107,831 $ 133,857 $ 109,604
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 133,508 105,420 110,002
Book value of assets sold 2,277 8,977 0
(Increase) decrease in deferred tax asset 34,600 62,000 8,000
Adjust securities to lower of cost or market 31,549 (10,207) 9,666
Changes in operating assets and liabilities:
(Increase) decrease in receivables 519 9,927 28,875
(Increase) decrease in prepaid expense, supplies
and deposits (26,304) 11,339 96
(Increase) decrease in inventory 7,691 2,974 (1,002)
(Increase) decrease in contingent liability 0 (70,325) 0
Increase (decrease) in accounts payable and
payroll taxes payable 5,869 (9,624) (649)
--------------- -------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 297,540 244,338 264,592
INVESTING ACTIVITIES
Cost of securities sold 208,527 86,367 26,356
Purchase of securities (362,991) (185,975) (80,887)
Purchase of land 0 0 (25,100)
Increase in start-up costs 0 (15,900) (10,000)
Purchase of property and equipment (32,606) (26,124) (16,317)
--------------- -------------- ---------------
NET CASH (USED)
BY INVESTING ACTIVITIES (187,070) (141,632) (105,948)
FINANCING ACTIVITIES
Sale of stock 32,811 0 0
Repayment of loans and leases (94,871) (109,361) (105,280)
--------------- -------------- ---------------
NET CASH (REQUIRED) BY
FINANCING ACTIVITIES (62,060) (109,361) (105,280)
--------------- -------------- ---------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 48,410 (6,655) 53,364
Cash and cash equivalents at beginning of year 177,086 183,741 130,377
--------------- -------------- ---------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 225,496 $ 177,086 $ 183,741
=============== ============== ===============
SUPPLEMENTAL INFORMATION
Taxes paid $ 100 $ 100 $ 100
Interest paid 193,049 76,661 73,958
</TABLE>
SUPPLEMENTAL INVESTING AND FINANCIAL ACTIVITIES:
During 1994, the Company took out a mortgage of $27,490 to acquire land with a
cost of $52,590. During 1996, the Company issued 2,000,000 shares of stock and
borrowed $1,950,000 to purchase land and buildings valued at $2,075,000.
See notes to the financial statements.
21
<PAGE>
BUFFS-N-PUFFS, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 and warehouse 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, 1996, a decrease of $31,519 was made to
adjust to market ($10,207 increase was made for 1995 and $9,666 decrease was
made for 1994).
Income Taxes:
No federal income taxes were due for the year ended December 31, 1996. At
December 31, 1996, the Company had unused general business credits of $7,844
which expire in 1998 through 2000, and contributions carryover of $32,524,
expiring in 1998 through 2001. The Company has a capital loss carryover of
$14,340 which expires in 1997. The Company also has a Federal net operating loss
carryover which, if not used, will expire as follows:
Year Ended Amount Expiration Date
------------------------ ------------------ -------------------
December 31, 1990 $ 299,501 12/31/2005
December 31, 1991 123,837 12/31/2006
------------------
$ 423,338
==================
Inventory:
Inventory consists of items for sale and use in the operations of the carwash.
Inventory is recorded at the lower of cost or market, on a first-in, first-out
basis.
Cash and Cash Equivalents:
For financial statement purposes, the Company considers all highly liquid
investments with an original maturity of three months or less when purchased to
be cash equivalents.
22
<PAGE>
BUFFS-N-PUFFS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
NOTE B - LOANS PAYABLE
During 1990, the former President of the Company and her husband personally
borrowed $518,000 from three financial institutions, using their residence and
other personal assets as collateral. $277,828 (including loan costs of $7,270)
of the money was used for the Company. The Company has treated the obligations
as being due to the individuals and is making the monthly loan payments to the
three institu tions. In early 1994, one obligation was paid in full, leaving two
loans. Interest rates range from 8.75% to 11.25%. The following is a summary of
debt at December 31, 1996 and 1995: <TABLE> <CAPTION>
Interest 1996 1995
Rate % Current Long-term Current Long-term
---------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Bank Mortgage (4) 8.26 $ 40,879 1,732,579 $ 0 $ 0
G. Phillip Condie(1) 7.50 0 120,000 50,000 120,000
Bank line of credit (3) 6.00 150,000 0 0 0
Escrow Services 9.50 12,757 4,599 5,087 16,612
Dan Pentelute 8.75-11.25 163 0 14,149 0
--------------- --------------- --------------- ---------------
$ 203,799 $ 1,857,178 $ 69,236 $ 136,612
=============== =============== =============== ===============
</TABLE>
(1) Monthly payments of interest only are $1,888 with the balance due by
9/1/1998. This loan is secured by land with a cost of $310,185.
(2) Monthly payments are $1,155. The loan is secured by land with a cost of
$52,590.
(3) Monthly payments of interest only with balance due 4/1/1997.
(4) Monthly payments are $15,487 and the balance is due 3/25/2001. The loan is
secured by land and buildings with a cost of $2,075,000.
Scheduled principal reductions for the next five years are as follows:
12/31/1997 $ 203,799
12/31/1998 168,986
12/31/1999 48,195
12/31/2000 52,331
12/31/2001 1,587,666
-------------
$ 2,060,977
=============
NOTE C - DEFERRED TAX ASSET
In February, 1992, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
supersedes substantially all existing authoritative 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 payable or
refundable. The Statement was applied in the Company's financial statements for
the calendar year commencing January 1, 1993 by recognizing the cumulative
effect of the change during 1993.
23
<PAGE>
BUFFS-N-PUFFS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1995
------------------ -----------------
<S> <C> <C> <C>
Current
Federal..................................................$ 0 $ 0
State.................................................... 1,600 100
------------------ -----------------
1,600 100
------------------ -----------------
Deferred
Federal.................................................. 26,100 60,100
State.................................................... 7,000 1,900
------------------ -----------------
33,100 62,000
------------------ -----------------
Income tax expense...................................................$ 34,700 $ 62,100
================== =================
</TABLE>
Reconciliation of income taxes computed at the federal statutory rate and the
income tax expense are as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1995
------------------ -----------------
<S> <C> <C>
Federal income taxes at statutory rate...............................$ 58,000 $ 60,700
State income taxes, net of federal benefit........................... 8,500 3,000
Difference due to graduated federal rates............................ (31,800) (1,600)
------------------ -----------------
$ 34,700 $ 62,100
================== =================
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1995
------------------ -----------------
<S> <C> <C> <C>
Net operating loss carryforward..........................$ 68,000 $ 113,400
Additonal cost of marketable
securities............................................. 25,400 14,600
------------------ -----------------
Net deferred tax assets..................................$ 93,400 $ 128,000
================== =================
</TABLE>
NOTE D- START-UP COSTS
These are costs associated with development of the carwash. The costs are being
amortized, depreciated or expensed. The costs include travel to view other
carwashes, equipment, inventory, legal fees for patents and trademarks, etc.
During 1995 and 1994, the Company spent $25,900 associated with property being
24
<PAGE>
BUFFS-N-PUFFS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
held for development into a second carwash operation. The cost will be amortized
when the carwash begins operations or added to the cost of the land if the
carwash is not developed.
NOTE E - 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. The Company has been making the payments for these
loans and the interest and principal have been amortized according to the
portion of 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 per cent 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 was to receive seven per cent 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 1996, the
Company exercised its option to purchase the land and buildings at a price of
$2,075,000. Also see Note F.
NOTE F - 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 a 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 anticipated that
the Company will be able to sell the land during 1997 at a substantial profit.
NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts payable, and accrued
expenses approximate fair value due to the short maturity periods of these
instruments. The fair value of the Company's long- term debt, based on the
present value of the debt, is $1,355,867.
25
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Officers and Directors
(1) Andrew A. Chudd, President and Director
(2) Alan Theis, Secretary/Treasurer and Director
(3) W. Sterling Mason, Jr., Director
(4) Craig Celantano, Director
(5) Richard Castellow, Director
All directors serve until the next annual meeting of stockholders or until
their successors have been duly qualified and elected.
(c) Identification of certain significant employees.
Their business backgrounds are set forth in (e) hereinafter.
(d) Family relationships.
The Company's majority stockholder is Daniel Pentelute. Mr.
Pentelute is also the owner of the real property on which the carwash
is located. There are no family relationships between any of the
directors or officers.
(e) Business experience.
(1) Background
ANDREW A. CHUDD, 46, President and Director of the Company since August
1992, has been involved in the carwash industry for approximately 5 1/2 years in
both management and carwash equipment sales. Mr. Chudd graduated from Hamilton
High School in California in 1968. He has attended LA Pierce College and West
Los Angles College, but has received no degree. Since October of 1985 Mr. Chudd
has been an independent business consultant to various corporations and
businesses. Mr. Chudd worked, from 1974 until 1985, primarily as an Insurance
Agent and has had limited experience in publicly-held companies.
Mr. Chudd was President and Director of Discovery Systems, Ltd., a blind
pool/blank check company until February, 1988 at which time new officers and
directors were elected at a shareholders' meeting. Mr. Chudd was President and
Director, until the fall of 1989, of Celebrity Limousine, Ltd., a Utah Public
26
<PAGE>
Company which operated a limousine service in Northern Utah under a permit from
the Utah Public Service Commission. Mr. Chudd was President and Director Of
Verazzana Ventures Ltd., a blind pool/blank check company until January 1, 1995,
at which time new officers and directors were elected at a shareholders'
meeting.
ALAN THEIS, 37, in 1982 received a bachelor of sciences degree in Business
Economics and Public Policy from Indiana University. Since July 1991 Mr. Theis
has been the Secretary and Treasurer of the Company. In March 1990, Mr. Theis
became the assistant accountant for the Company. From June 1988 to March 1990
Mr. Theis worked as a construction worker for Pentelute Properties, a company
controlled by Daniel Pentelute, the Company's major stockholder. From 1985 to
1987 Mr. Theis was an employee for the Park City Ski Corporation.
W. STERLING MASON, JR., 50, is a Director of the Company and has been since
January 1989, except for a short time at the beginning of 1991. Mr. Mason, is
presently involved in real estate investments and business opportunities in
Mexico. Mr. Mason was engaged in the private practice of law in Salt Lake City,
Utah since 1975. His law practice focused on the business and securities areas
of law. Mr. Mason graduated from the University of Utah Law School in 1975
receiving a Juris Doctor Degree. In addition, Mr. Mason received a Masters in
Business Administration from the University of Utah in 1974 and has a Bachelor
of Science Degree in Finance which he received in 1972. Prior to that time, Mr.
Mason was a stockbroker with various stock brokerage firms, both in Salt Lake
City, Utah and San Francisco, California.
CRAIG CELANTANO, 39, has been involved in the carwash industry since 1967.
Mr. Celantano has experience in carwash design and layout, equipment
installations and operations. He has owned and operated both self service and
full service carwashes. Mr. Celantano currently owns and operates a self service
location in Tucson, Arizona. He has been a distributor for Hanna carwash
equipment for 15 years. Mr. Celantano is currently Vice-President of Blue Coral
Systems, a leading manufacturer of carwash chemicals. He oversees the North
American sales force, as well as responsibilities in equipment design,
application, research and development.
RICHARD CASTELLOW, 47, received a bachelor of arts degree in economics from
the University of Washington in 1975. Since 1990 Mr. Castellow has been the
Northwest distributor for Belanger, Inc., a major manufacturer of carwash
equipment. During the last four years he has consulted and done work for the
majority of the largest carwashes in the northwest. From 1986 to 1989 Mr.
Castellow worked as a carwash consultant and an installer of equipment for
carwashes. In 1983 he became co-owner and operator of three Chevron gas stations
that included three exterior tunnel carwashes and seven self-serve carwash bays.
He operated the washes for three and a half years, at which time the partnership
was dissolved and the washes were sold.
(2) Directorships.
None of the officers and directors serve on the Board of any other company
whose securities are registered pursuant to Section 12 or subject to the
requirements of Section 15 (d) of the Exchange Act or any company registered
under the Investment Company Act of 1940, with the exception of Mr. Chudd who
was a director and officer of Verazzana Ventures, Ltd., which files periodic
reports under Section 15(d) of the exchange Act, until January, 1995.
(f) Involvement in certain legal proceedings.
None of the officers or directors have any disability as defined in (1)
through (6) of this item.
27
<PAGE>
(g) Promoters and control persons.
Daniel Pentelute, although not an officer or director of the Company, is
the Company's largest and majority shareholder and, in addition, has been (until
March 96) the Company's landlord. Mr. Pentelute, age 47, attended Brigham Young
University and the University of Utah between the years of 1967 and 1970. Mr.
Pentelute was the President and a Director of the Company from 1980 to 1985. He
has been a consultant to the Company and developed the Buffs 'N' Puffs carwash
concept. Since 1986 Mr. Pentelute has engaged in the development and management
of real property located in the states of Nevada, Utah and Montana. Mr.
Pentelute is also a private investor in various business enterprises and
ventures.
ITEM 11. EXECUTIVE COMPENSATION
None of the officers and directors of the Company received remuneration in
excess of $60,000 (Sixty thousand dollars) for the year ended December 31, 1995.
REMUNERATION TABLE
1996 1997
NAME SERVING AS REMUNERATION PROPOSAL
- --------------------- --------------------- -------------- ------------
Andrew A. Chudd President, Director
since August 1992 $ 40,125 $ 41,000
W. Sterling Mason Jr. Director 0* 0*
Craig Celantano Director 0 0
Richard Castellow Director 0 0
Alan Theis Secretary, Director $ 36,451 $ 37,000
------------- -----------
TOTALS $ 76,576 $ 78,000
============= ============
Aggregate remuneration for fiscal year 1996 totaled $76,576. At the present
time no remuneration is paid to any director for attendance at director
meetings. Expenses incurred to attend any board meetings may be paid. Mr. Alan
Theis and Mr. Andrew A. Chudd are full-time employees of the Company. Mr. Mason,
Mr Castellow and Mr. Celantano are solely directors of the Company and, as such,
only devote as much time as needed in that position.
*Mr. Mason will be compensated for any legal work performed for the
Company. During 1996 Mr. Mason received $2,975 as legal fees and reimbursement
for expenses for the Company.
Employee Stock Option Plan
NONE.
28
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
(a) (b) Security ownership of certain beneficial owners and management.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Of Beneficial of Beneficial Percent of
Title of Class Owner Ownership Class**
- ----------------------------- ------------------------------- ------------------------------ -------------
<S> <C> <C> <C>
Common Stock Daniel F. Pentelute 5,293,525* 54.85%
6500 South State St.
Murray, Utah 84107
Andrew A. Chudd 400,000 4%
Alan Theis 50,000 0%
</TABLE>
* Includes 168,625 shares held by Penex, Inc., a Nevada Corporation and
44,000 shares held by Desert Land, Inc., a Nevada Corporation both of
which Mr. Pentelute is the sole shareholder.
** Based upon 8,354,900 shares outstanding without reduction of the
treasury shares held by the Company.
(c) Changes in Control
In 1991 Daniel F. Pentelute beneficially owned 2,428,825 shares of the
Company's common stock or approximately 40% of the total outstanding shares. In
addition, Donna M. Anderson, Mr. Pentelute's wife at the time, owned 1,143,625
shares or approximately 19% of the total outstanding shares. At that time Mr.
Pentelute and Ms. Anderson were involved in divorce proceedings. As a result of
said divorce proceedings, Mr. Pentelute received almost all of the shares held
by Ms. Anderson. Therefore his percentage ownership of the total outstanding
shares of the Company increased in 1992 from approximately 40% to 54.85%.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others.
Related Party Transactions.
In April 1990 the former President of the Company and her husband
personally borrowed $518,000 from three financial institutions, using their
residence and other personal assets as collateral. $277,328 (including loan
costs of $7,270) of the money was used for the Company. The Company has treated
the obligation as being due to these individuals and has been making monthly
loan payments to the three institutions. In early 1994 one obligation was paid
in full, leaving two loans with interest rates ranging from 8.75% to 10.5%. The
Company is not an obligor or a guarantor on any of the three obligations. As of
December 1, 1993, the company is also paying Mr. Pentelute directly $3,018
monthly. The entire $3,018 applies to principal due. As of December 31, 1996 the
Company's total share for all these loans was approximately $0.
29
<PAGE>
The Following table shows a list of the loans for which the Company has made
payments.
Original
Lender Principal Interest Term
- -------------------- ------------ ----------- -----------------
Zions Bank* $ 250,000 Prime + 2% 5yrs with balloon.
*Paid off as
of Jan 1, 1994
Valley Mortgage $ 234,000 11.05% 30yrs
Great Western $ 34,000 Prime + 2.5% 15yrs
Other Information.
For the year ended December 31, 1996, the Company paid rent of $15,452 to
Pentelute Properties, a company controlled by Daniel Pentelute, the majority
shareholder of the Company who owns approximately 54.85% of the issued and
outstanding stock of the Company. The rent was paid pursuant to a lease which
had a five year term with a five year renewal option and an option to purchase
the property.The property was purchased in March,1996.
(b) Certain Business Relationships.
Business entities in which directors of the Company had an interest during
the last fiscal year have not had any transactions with the Company. However,
Director W. Sterling Mason, Jr. is an Attorney at Law. Mr. Mason was paid $2,975
in 1996.
(c) Indebtedness of Management.
NONE.
(d) Transaction with promoters.
The Company had a five (5) year lease on the property and buildings for its
carwash. The Company leased the land and buildings from Pentelute Properties, a
d/b/a of Daniel F. Pentelute, a major shareholder of the Company. Mr. Pentelute
owns approximately 54.85% of the issued and outstanding shares of the Company.
Monthly payments commenced on June 1, 1991, and were based on a percentage of
monthly gross sales excluding fuel sales. Initially rental was four per cent
(4%) of the gross sales excluding fuel sales. On April 1, 1992, the monthly
percentage increased to seven per cent (7%). The Company also maintains its
corporate headquarters on the premises. Under the lease the Company provides two
offices to the Lessor. In addition, under the terms of the lease the Company had
an option to renew the lease for an additional five year term at a rental of
seven per cent (7%) of gross sales excluding fuel sales with a minimum rent of
$5,000 monthly. Also, the Company had an option to purchase the property
commencing at the end of the initial five year term which option was exercisable
on the anniversary date of the lease each year in the five year option term. The
Company exercised its option to purchase the property and buildings for
$2,075,000 in March, 1996. For the year ended December 31, 1996, the Company
paid rent of $15,452 to Pentelute Properties.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
<S> <C>
(a) 1. Financial Statements
The following Financial Statements of BUFFS-N-PUFFS, LTD. are
included in PART II, ITEM 8:
See page 16 for table of contents
(a) 2. Financial Statement Schedules
The following financial statement schedules of BUFF-N-PUFFS, LTD. are included
in PART IV, ITEM 14(d) (3):
Report of Independent Certified Public Accountants on Supplementary
Financial Information.................................................................................... 32
Schedule I - Marketable Securities....................................................................... 33
Schedule V - Property, Plant and Equipment............................................................... 34
Schedule VI - Accumulated Depreciation and Amortization of Property,
Plant and Equipment...................................................................................... 35
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
31
<PAGE>
Smith & Company
Certified Public Accountants
10 West 100 South, #700 Telephone: 801-575-8297
Salt Lake City, UT 84101 Facsimile: 801-575-8306
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
Buffs-N-Puffs, Ltd.
Salt Lake City, Utah
Our audit of the basic financial statements presented in the preceding section
of this report was made primarily to form an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of Buffs-N-Puffs, Ltd., the results of its operations or cash
flows in conformity with generally accepted accounting principles. The following
information consisting of Schedule I, Schedule V and Schedule VI is included to
comply with reporting requirements of the Securities and Exchange Commission.
Such data was subjected to the audit procedures applied in the audit of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 11, 1997
32
<PAGE>
BUFFS-N-PUFFS, LTD. AND SUBSIDIARY
SCHEDULE I - MARKETABLE SECURITIES
</TABLE>
<TABLE>
<CAPTION>
Market
Number Original Value
Name of Issuer of Shares Cost 12/31/96
- --------------- ------------------ ----------------- -----------------
<S> <C> <C> <C>
Novell Inc. 100 $ 1,522 $ 946
KMS Industries 2,750 33,438 0
Cirtech 50,000 1,000 0
Agri-world 4,000 25 0
Fast Eddies Racing Stables 5,000 5,000 0
Dimedix 1,334 200 0
NVF Company 10,000 4,202 0
Berkey, Inc. 1,000 5,930 0
Interpac Alliance 5,000 50 0
Fredericks of Hollywood A 1,000 5,869 4,125
Fredericks of Hollywood B 500 2,404 2,063
Alliance Gaming Common 38 163 166
Alliance Gaming 23 1,621 2,182
Shaw Industries Inc. 14,000 170,422 166,250
Station Casinos 15,000 174,167 151,875
Data Broadcasting 500 4,175 3,500
Engineering Asimtn 500 12,441 12,125
----------------- -----------------
Totals* $ 422,629 $ 343,232
================= =================
Market
Number Original Value
Name of Issuer of Shares Cost 12/31/95
- --------------- ------------------ ----------------- -----------------
Interpac Alliance 5,000 $ 50 $ 0
KMS Industries 2,750 33,438 343
Cirtech 50,000 1,000 0
Agri-world 4,000 25 0
Fast Eddies Racing Stables 5,000 5,000 0
Dimedix 1,334 200 0
NVF Company 10,000 4,202 0
Alfin Fragrances 5,000 8,809 6,374
Berkey, Inc. 1,000 5,930 0
Bally Gaming International 500 5,924 4,063
Fredericks of Hollywood A 1,000 5,869 4,250
Fredericks of Hollywood B 500 2,404 1,937
Westinghouse Electric 200 2,596 3,275
Maytag Corp. 4,600 76,627 93,150
Minimed Inc. 5,000 58,052 62,500
International Game Technology 4,000 56,518 43,000
Novell Inc. 100 1,522 1,425
----------------- -----------------
Totals* $ 268,166 $ 220,317
================= =================
</TABLE>
*Marketable securities are carried on the balance sheets as current assets.
33
<PAGE>
BUFFS-N-PUFFS, LTD. AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at End
of Period At Cost Retirement of Period
----------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Land & buildings $ 310,185 $ 0 $ 0 $ 310,185
Leasehold
improvements 194,044 0 0 194,044
Fixtures &
equipment 840,006 16,317 7,650 848,673
----------------- ------------------ ------------------- -----------------
$ 1,344,235 $ 16,317 $ 7,650 $ 1,352,902
================= ================== =================== =================
Year ended December 31, 1995:
Land & buildings $ 310,185 $ 0 $ 0 $ 310,185
Leasehold
improvements 194,044 577 0 194,621
Fixtures &
equipment 848,673 25,547 18,268 855,952
----------------- ------------------ ------------------- -----------------
$ 1,352,902 $ 26,124 $ 18,268 $ 1,360,758
================= ================== =================== =================
Year ended December 31, 1996:
Land & buildings $ 310,185 $ 2,075,000 $ 0 $ 2,385,185
Leasehold
improvements 194,621 3,566 0 198,187
Fixtures &
equipment 855,952 29,040 7,590 877,402
----------------- ------------------ ------------------- -----------------
$ 1,360,758 $ 2,107,606 $ 7,590 $ 3,460,774
================= ================== =================== =================
</TABLE>
34
<PAGE>
BUFFS-N-PUFFS, LTD. AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Period Expenses Retirement of Period
----------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Land & buildings $ 0 $ 0 $ 0 $ 0
Leasehold
improvements 56,433 15,144 0 71,577
Fixtures &
equipment 366,375 88,576 7,650 447,301
----------------- ------------------ ------------------- -----------------
$ 422,808 $ 103,720 $ 7,650 $ 518,878
================= ================== =================== =================
Year ended December 31, 1995:
Land & buildings $ 0 $ 0 $ 0 $ 0
Leasehold
improvements 71,577 15,203 0 86,780
Fixtures &
equipment 447,301 84,153 9,291 522,163
----------------- ------------------ ------------------- -----------------
$ 518,878 $ 99,356 $ 9,291 $ 608,943
================= ================== =================== =================
Year ended December 31, 1996:
Land & buildings $ 0 $ 27,176 $ 0 $ 27,176
Leasehold
improvements 86,780 15,758 0 102,538
Fixtures &
equipment 522,163 84,804 5,313 601,654
----------------- ------------------ ------------------- -----------------
$ 608,943 $ 127,738 $ 5,313 $ 731,368
================= ================== =================== =================
Depreciation for year $ 127,738
Amortization for year 5,770
-----------------
$ 133,508
=================
</TABLE>
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated this ____ day of March, 1996.
BUFFS-N-PUFFS, LTD.
By /s/ ANDREW A. CHUDD
Andrew A. Chudd
President, Chief Executive
Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
President, Chief Executive
/s/ ANDREW A. CHUDD Officer and Director
- ---------------------------- ----------
Andrew A. Chudd
Secretary/Treasurer,
Chief Financial
/s/ ALAN R. THEIS Officer and Director
- ---------------------------- ----------
Alan R. Theis
/s/ W. STERLING MASON, JR. Director
- ---------------------------- ----------
W. Sterling Mason, Jr.
36
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Buffs-N-Puffs Ltd. December 31, 1996 financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000350133
<NAME> BUFFS-N-PUFFS LTD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 225,496
<SECURITIES> 343,232
<RECEIVABLES> 15,722
<ALLOWANCES> 0
<INVENTORY> 18,834
<CURRENT-ASSETS> 654,363
<PP&E> 3,460,774
<DEPRECIATION> 731,368
<TOTAL-ASSETS> 3,575,179
<CURRENT-LIABILITIES> 258,591
<BONDS> 1,857,178
0
0
<COMMON> 846
<OTHER-SE> 1,458,564
<TOTAL-LIABILITY-AND-EQUITY> 3,575,179
<SALES> 50,073
<TOTAL-REVENUES> 1,510,079
<CGS> 0
<TOTAL-COSTS> 1,303,311
<OTHER-EXPENSES> 33,826
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193,049
<INCOME-PRETAX> 142,531
<INCOME-TAX> 34,700
<INCOME-CONTINUING> 107,831
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,831
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
