<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT
For the transition period from ____ to ____
Commission File Number 0-9812
GREASE MONKEY HOLDING CORPORATION
---------------------------------
(Name of small business issuer as specified in its charter)
Utah 87-0321320
- ---------------------------------- ------------------------------------
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
216 16th Street Mall, Suite 1100
Denver, Colorado 80202
-----------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (303) 534-1660
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Outstanding at
Class August 1, 1996
----------------------------- ----------------
Common Stock, $0.03 par value 4,359,888 shares
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE>
GREASE MONKEY HOLDING CORPORATION
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED JUNE 30, 1996
FORM 10-QSB
PART I FINANCIAL INFORMATION
Consolidated Statements of Operations . . . . . . . . . . Page 1
Consolidated Balance Sheets . . . . . . . . . . . . . . . Page 2
Consolidated Statements of Stockholders' Equity . . . . . Page 4
Consolidated Statements of Cash Flows . . . . . . . . . . Page 5
Notes to Consolidated Financial Statements. . . . . . . . Page 8
Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . . . . . Page 10
PART II OTHER INFORMATION
Legal Proceedings . . . . . . . . . . . . . . . . . . . . Page 16
Submission of Matters to a Vote of Security Holders . . . Page 16
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . Page 17
Signatures. . . . . . . . . . . . . . . . . . . . . . . . Page 18
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ---------------------
1996 1995 1996 1995
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating Revenue:
Royalty fees . . . . . . . . . . . . . . . . . $ 813,351 794,031 1,564,493 1,582,436
Franchise sales - center openings. . . . . . . - 133,800 - 265,800
Product and equipment revenue. . . . . . . . . 158,633 276,120 330,608 639,056
Sales by Company-owned Centers . . . . . . . . 3,778,367 3,129,075 7,063,639 5,975,756
Leasing revenue. . . . . . . . . . . . . . . . 343,244 347,737 700,802 696,510
Other. . . . . . . . . . . . . . . . . . . . . 29,154 20,462 96,396 87,818
---------- --------- --------- ---------
5,122,749 4,701,225 9,755,938 9,247,376
---------- --------- --------- ---------
Operating Expenses:
Franchise costs - center openings. . . . . . . - 17,425 - 46,209
Product and equipment costs. . . . . . . . . . 53,957 163,719 110,716 406,076
Company-owned Centers. . . . . . . . . . . . . 3,256,216 2,711,356 6,104,715 5,291,075
Leasing expense. . . . . . . . . . . . . . . . 329,730 355,569 684,170 705,880
General and administrative expenses. . . . . . 1,164,110 1,007,248 2,254,243 2,007,838
Provision for credit losses. . . . . . . . . . 28,346 42,500 58,346 65,000
Depreciation . . . . . . . . . . . . . . . . . 180,548 159,997 337,495 319,801
Amortization . . . . . . . . . . . . . . . . . 69,002 43,890 116,512 82,722
---------- --------- --------- ---------
5,081,909 4,501,704 9,666,197 8,924,601
---------- --------- --------- ---------
Operating income (loss). . . . . . . . . . . . . 40,840 199,521 89,741 322,775
---------- --------- --------- ---------
Other income (expense):
Gain (loss) on sale/disposition of centers . . 29,707 (14,182) (3,412) (16,841)
Undeveloped franchise licenses canceled. . . . 27,563 - 27,563 4,000
Interest income. . . . . . . . . . . . . . . . 6,347 10,069 9,365 19,711
Interest expense . . . . . . . . . . . . . . . (176,391) (145,888) (317,231) (269,664)
---------- --------- --------- ---------
(112,774) (150,001) (283,715) (262,794)
---------- --------- --------- ---------
Net income (loss). . . . . . . . . . . . . . . . $ (71,934) 49,520 (193,974) 59,981
---------- --------- --------- ---------
---------- --------- --------- ---------
Earnings (loss) per common share . . . . . . . . $ (0.02) * (0.06) *
---------- --------- --------- ---------
---------- --------- --------- ---------
Weighted average shares outstanding. . . . . . . 4,357,310 4,361,256 4,351,135 4,347,790
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
* Less than $.01 per share.
(UNAUDITED)
1
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
- ------ ------------- ------------
<S> <C> <C>
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 282,402 385,167
Restricted cash including certificates of
deposit . . . . . . . . . . . . . . . . . . . . . . 33,507 32,232
Accounts receivable, net of allowance for
doubtful accounts of $340,059 at June 30, 1996,
and $399,141 at December 31, 1995 . . . . . . . . . 1,052,599 1,123,267
Current portion of notes receivable,
net of allowance for uncollectible amounts . . . . 100,258 105,584
Current portion of net investment
in direct financing leases . . . . . . . . . . . . 188,316 187,195
Inventories . . . . . . . . . . . . . . . . . . . . . 872,551 697,383
Prepaid expenses and supplies . . . . . . . . . . . . 214,358 155,661
------------- ------------
2,743,991 2,686,489
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . ------------- ------------
Property and Equipment, at Cost, Pledged:
Land . . . . . . . . . . . . . . . . . . . . . . . . 152,079 152,079
Buildings (including buildings under capital leases) 5,951,025 5,294,542
Furniture and fixtures . . . . . . . . . . . . . . . 542,597 486,648
Leasehold improvements . . . . . . . . . . . . . . . 646,973 630,073
Machinery and equipment . . . . . . . . . . . . . . 1,752,028 1,454,289
------------- ------------
9,044,702 8,017,631
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . (3,234,731) (3,061,632)
------------- ------------
NET PROPERTY AND EQUIPMENT . . . . . . . . . . . . 5,809,971 4,955,999
------------- ------------
Other Assets:
Net investment in direct financing leases . . . . . . 3,150,138 3,331,596
Notes receivable, net of allowance for uncollectible
amounts . . . . . . . . . . . . . . . . . . . . . 337,274 99,036
Deferred franchising costs . . . . . . . . . . . . . 184,739 159,788
Goodwill and covenants not to compete, net
of accumulated amortization of $849,643 at June
30, 1996, and $746,793 at December 31, 1995 . . . . 2,544,800 1,588,348
Real estate held for sale . . . . . . . . . . . . . . 173,500 173,500
Other assets, net of accumulated
amortization of $134,375 at June 30, 1996,
and $120,713 at December 31, 1995 . . . . . . . . . 126,189 150,877
------------- ------------
TOTAL OTHER ASSETS . . . . . . . . . . . . . . . . 6,516,640 5,503,145
------------- ------------
$ 15,070,602 13,145,633
------------- ------------
------------- ------------
(UNAUDITED)
(continued on next page)
2
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<CAPTION>
JUNE 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------------ ------------- ------------
<S> <C> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $ 1,060,129 773,983
Accrued salaries and wages . . . . . . . . . . . . . 186,322 191,116
Other accrued liabilities . . . . . . . . . . . . . . 212,794 218,426
Current portion of long-term debt . . . . . . . . . . 511,096 420,887
Current portion of obligations
under capital leases . . . . . . . . . . . . . . . 394,510 363,209
------------- ------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . 2,364,851 1,967,621
------------- ------------
Long-term Debt . . . . . . . . . . . . . . . . . . . . 3,230,396 2,223,817
Obligations Under Capital Leases . . . . . . . . . . . 6,866,755 6,374,027
Deferred Franchise Sales Revenue . . . . . . . . . . . 855,463 655,553
Stockholders' Equity:
Series C Preferred stock, issued and outstanding
20,896 shares and 20,958 shares at June 30, 1996
and December 31, 1995, respectively, stated
value of $100.00 . . . . . . . . . . . . . . . . . . 2,089,638 2,095,838
Common stock, par value $.03, 20,000,000
shares authorized, 4,359,888, and 4,336,764,
shares issued and outstanding at June 30,
1996 and December 31, 1995, respectively . . . . . 130,797 130,103
Capital in excess of par value . . . . . . . . . . . 5,801,250 5,773,248
Accumulated deficit . . . . . . . . . . . . . . . . . (6,268,548) (6,074,574)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . 1,753,137 1,924,615
Commitments and Contingencies . . . . . . . . . . . .
------------- ------------
$ 15,070,602 13,145,633
------------- ------------
------------- ------------
</TABLE>
(UNAUDITED)
3
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- -----------------------------------
Capital in
Number of Number of Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit Total
-------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 . . . . . . . 22,205 $2,220,500 4,305,359 $129,161 5,707,382 (6,312,764) 1,744,279
Issuance of common stock pursuant to
employee benefit plan. . . . . . . . . . - - 11,542 346 20,682 - 21,028
Conversion of Series C Preferred stock
to common stock, including payment
of accumulated dividends . . . . . . . . (1,247) (124,662) 49,863 1,496 113,224 - (9,942)
Offering costs of Series C Preferred
stock. . . . . . . . . . . . . . . . . . - - - - (7,500) - (7,500)
Common stock reacquired and
canceled . . . . . . . . . . . . . . . . - - (30,000) (900) (60,540) - (61,440)
Net income . . . . . . . . . . . . . . . . - - - - - 238,190 238,190
-------- --------- --------- --------- --------- ----------- ---------
Balance at December 31, 1995 . . . . . . . 20,958 2,095,838 4,336,764 130,103 5,773,248 (6,074,574) 1,924,615
Issuance of common stock pursuant to
employee benefit plan. . . . . . . . . . - - 20,644 620 22,605 - 23,225
Conversion of Series C Preferred stock
to common stock, including payment
of accumulated dividends . . . . . . . . (62) (6,200) 2,480 74 5,397 - (729)
Net loss . . . . . . . . . . . . . . . . . - - - - - (193,974) (193,974)
-------- --------- --------- --------- --------- ----------- ---------
Balance at June 30, 1996 . . . . . . . . . 20,896 $2,089,638 4,359,888 $ 130,797 5,801,250 (6,268,548) 1,753,137
-------- --------- --------- --------- --------- ----------- ---------
-------- --------- --------- --------- --------- ----------- ---------
</TABLE>
(UNAUDITED)
4
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . $ (193,974) 59,981
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Increase in deferred franchise sales revenue. . . . . 318,800 47,000
Franchise sales revenue recognized-center openings. . - (265,800)
Increase in deferred franchising costs. . . . . . . . (51,130) (52,135)
Franchise costs recognized - center openings. . . . . - 46,209
Provision for credit losses . . . . . . . . . . . . . 58,346 65,000
Net loss realized on retirement of property and
equipment. . . . . . . . . . . . . . . . . . . . . . 666 13,636
Depreciation and amortization . . . . . . . . . . . . 454,007 402,523
Undeveloped franchise licenses canceled . . . . . . . (27,563) (4,000)
Interest on litigation award. . . . . . . . . . . . . - 11,453
(Gain) loss on sale of centers. . . . . . . . . . . . (5,160) 17,041
Other, net. . . . . . . . . . . . . . . . . . . . . . (25,458) (304)
Change in assets and liabilities:
Increase in accounts receivable. . . . . . . . . . . (348,073) (206,102)
(Increase) decrease in notes receivable. . . . . . . (34,918) 12,635
(Increase) decrease in inventories . . . . . . . . . (122,682) 25,158
Increase in prepaid expenses and supplies. . . . . . (58,697) (99,238)
(Decrease) increase in accounts payable. . . . . . . 346,013 (160,773)
Decrease in accrued salaries and wages
and other liabilities . . . . . . . . . . . . . . . (49,468) (4,171)
------------ ------------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . $ 260,709 (91,887)
------------ ------------
</TABLE>
(UNAUDITED)
(continued on next page)
5
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from investing activities:
Principal receipts on direct financing leases . . . . . . $ 85,267 92,286
Acquisition of centers. . . . . . . . . . . . . . . . . . (394,389) (870,388)
Sale of centers . . . . . . . . . . . . . . . . . . . . . 21,573 123,233
Capital expenditures. . . . . . . . . . . . . . . . . . . (217,975) (135,689)
(Increase) decrease in other assets . . . . . . . . . . . 11,028 (36,290)
------------ ------------
Net cash used in investing activities . . . . . . . . (494,496) (826,848)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt. . . . . . . . . . . . . . . 522,000 1,241,880
Principal payments on long-term debt. . . . . . . . . . . (229,438) (145,364)
Principal payments on capital lease
obligations. . . . . . . . . . . . . . . . . . . . . . . (164,035) (147,093)
Issuance of preferred stock, net of offering costs. . . . - (7,500)
Payment of accumulated dividends
upon conversion of preferred stock to common stock . . . (729) (9,942)
Decrease (increase) in restricted cash . . . . . . . . . (1,276) 110,608
Increase in lease deposit obligations. . . . . . . . . . 4,500 1,800
------------ ------------
Net cash provided by financing activities . . . . . . 131,022 1,044,389
------------ ------------
Net increase (decrease) in cash. . . . . . . . . . . . . . (102,765) 125,654
Cash, beginning of period. . . . . . . . . . . . . . . . . 385,167 256,631
------------ ------------
Cash, end of period. . . . . . . . . . . . . . . . . . . . $ 282,402 382,285
------------ ------------
------------ ------------
Supplemental disclosures of cash flow
information -
Cash paid during the period for interest . . . . . . . $ 528,517 469,567
------------ ------------
------------ ------------
</TABLE>
(UNAUDITED)
(continued on next page)
6
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental Schedule of Non-cash Investing and Financing Activities:
The following table sets forth, by period, the amount and nature of
amounts paid and received for the acquisition/purchase and foreclosure and
sale (refranchising) of Company-owned Centers.
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1996 1995
----------- ------------
Acquisitions/Purchases and Foreclosures:
Number of Centers acquired/purchased . . . 2 1
----------- ------------
----------- ------------
Number of Centers foreclosed . . . . . . . 5 -
----------- ------------
----------- ------------
Receivables applied (net of related
allowance) . . . . . . . . . . . . . . . $ 251,328 -
Liabilities assumed. . . . . . . . . . . . 1,216,724 -
Cash paid. . . . . . . . . . . . . . . . . 394,389 870,388
----------- ------------
Cost of assets acquired. . . . . . . . . . $ 1,862,441 870,388
----------- ------------
----------- ------------
Sales:
Number of Centers refranchised . . . . . . 3 2
----------- ------------
----------- ------------
Cash received. . . . . . . . . . . . . . . $ 21,573 123,233
Notes received . . . . . . . . . . . . . . 112,232 5,500
Liabilities assumed by purchaser . . . . . 19,500 -
(Gain) Loss on sale. . . . . . . . . . . . (5,160) 17,041
Operating/Marketing subsidies granted
purchaser. . . . . . . . . . . . . . . . (49,750) -
Franchise fee revenue. . . . . . . . . . . 28,000 25,000
Franchise costs. . . . . . . . . . . . . . (5,000) (7,500)
----------- ------------
Net book value of centers refranchised . . $ 121,395 163,274
----------- ------------
----------- ------------
During the six months ended June 30, 1996 and 1995, non-cash transactions
consisted of the Company issuing 20,644 and 6,858 shares of common stock at an
average value of $1.13 and $2.20 per share respectively, in accordance with its
matching requirement under the Company's 401(k) plan. Other non-cash
transactions during the first six months of 1996 included: a settlement
agreement with a franchisee, who owned two centers, whereby, $109,439 of net
receivables, ($7,000) of lease deposits and one undeveloped license of
($16,312), were exchanged for a note receivable of $86,127 upon the sale of the
centers to a new franchisee; and a capital lease obligation of $368,000 was
recorded.
(UNAUDITED)
7
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month and six-month periods ended June 30, 1996
and June 30, 1995, (b) the financial position at June 30, 1996, (c) the
statements of cash flows for the six-month periods ended June 30, 1996 and
1995, and (d) the changes in stockholders' equity for the six-month period
ended June 30, 1996, have been made.
2. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for financial statements. For further information, refer to the
audited consolidated financial statements and notes thereto for the year
ended December 31, 1995, included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on March 29, 1996.
3. The results for the three-month and six-month periods ended June 30, 1996,
are not necessarily indicative of the results to be expected for the entire
fiscal year of 1996.
4. STOCKHOLDERS' EQUITY
On June 11, 1996, at the Annual Meeting of Shareholders, the Company's
shareholders voted to amend Article IV of the Company's Articles of
Incorporation to increase the authorized shares of Common Stock with a par
value of $0.03 per share to 20,000,000 shares.
The Company's Series C, 6% cumulative, preferred stock is redeemable at the
option of the Company upon 60 days prior written notice after December 31,
1996. At the option of the holder, at any time prior to the close of
business on the redemption date, each share of Series C Preferred stock,
plus any accumulated unpaid dividends, may be converted into shares of
common stock at a conversion price of $2.50 per share of common stock. On
June 30, 1996, accumulated unpaid dividends totaled $318,363.
The Company has an employee deferred compensation 401(k) plan and matches
employee contributions to this plan in an amount equal to 50% of the
employees' contribution, up to a maximum of 6% of the employees'
compensation. The Company's contribution is paid with its $0.03 par value
common stock (net of forfeitures) valued at market on the date of the
contribution. During the first six months of 1996 and 1995, the Company
contributed 20,644 and 6,858 shares to this plan at an average of $1.13 and
$2.20 per share, respectively.
5. EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is determined based on the number of
common and common equivalent shares outstanding and is adjusted for the
assumed conversion of shares issuable upon exercise of options and
warrants, after the assumed repurchase of common shares with the related
proceeds (anti-dilutive for all periods presented except second quarter of
1995). Earnings
(continued)
8
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(loss) per share for all periods was computed after reduction for preferred
stock dividends ($31,259 and $31,367 for the second quarter of 1996 and
1995, respectively, and $62,561 and $63,240 for the first six months of
1996 and 1995, respectively). The assumed conversion of preferred stock
was also anti-dilutive.
6. COMMITMENTS AND CONTINGENCIES
The Company leases Grease Monkey Center sites under capital lease
agreements. These sites are either subleased to franchisees or operated as
Company-owned Centers. The typical lease period is 15 to 20 years and some
leases contain renewal options. These leases are accounted for as capital
leases and are capitalized using interest rates appropriate at the
inception of each lease.
The Company is a party to legal proceedings including claims by franchisees
against the Company that arise in the ordinary course of business. In the
opinion of management, the outcome of these matters will not have a
material effect on the financial condition, results of operations or cash
flows of the Company.
7. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121) was issued in March 1995, by the Financial Accounting Standards
Board. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The adoption of SFAS 121 by the
Company in the first quarter of 1996 did not have an effect on the
Company's financial statements.
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR
STOCK BASED COMPENSATION (SFAS 123), was issued by the Financial Accounting
Standards Board in October 1995. SFAS 123 establishes financial
accounting and reporting standards for stock-based employee compensation
plans as well as transactions in which an entity issues its equity
instruments to acquire goods and services from non-employees. This
statement defines a fair value based method of accounting for employee
stock option or similar equity instruments, and encourages all entities to
adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES. Entities electing to remain with the accounting in
Opinion 25 must make pro forma disclosures on net income and, if presented,
earnings per share, as if the fair value based method of accounting defined
by SFAS 123 had been applied. The Company adopted SFAS 123 in the first
quarter of 1996 and elected to continue accounting for its equity
instruments using the accounting prescribed by Opinion 25. The Company
will include the disclosures required by SFAS 123 in the Company's 1996
annual report.
9
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company reported a loss of ($193,974) for the first half of 1996, as
compared to income of $59,981 for the first half of 1995. For the second
quarter of 1996, the Company recognized a loss of ($71,934) compared to income
of $49,520 for the same quarter in 1995. The losses recorded in 1996 compared
to the income recorded in 1995 can be attributed to the lack of center openings
combined with increased legal expenses offset by improved margins at
Company-owned Centers.
Total revenue increased by $508,562 (5%) for the first half of 1996,
compared to the first half of 1995. Revenue during the second quarter of
1996 increased $421,524 over the same quarter last year, an increase of 9%.
The increases are due primarily to an increase in the average number of
Company-owned Centers (based on number of months operated). The Company
operated twenty-nine centers for the first six months of 1995 compared to
thirty-two centers for the first six months of 1996. Averages for the second
quarter periods were twenty-nine centers in 1995 and thirty-one centers in
1996. Company-owned Center revenue increased $1,087,883 over the first six
months of 1995 and $649,292 over the second quarter of 1995. The increases
realized in Company-owned Center revenue were offset by reductions in revenue
recognized on the opening of franchised centers, and product and equipment
revenue. Revenue related to royalties and marketing allowances remained
relatively flat despite decreases in the number of franchised centers.
Royalty fees are a percentage of gross sales paid monthly by all franchised
Grease Monkey Centers. Royalty fee revenue for the first half of 1996 decreased
by 1% over the first half of 1995 to $1,564,493. Royalty fee revenue for the
second quarter of 1996 increased 2% over the second quarter of 1995 to $813,351.
The minor increases and decreases in royalty revenue result from the termination
and/or closure of eighteen franchise centers since January 1, 1995, representing
an approximate decrease in royalty revenue over the six month reporting period
of 1996 as compared to 1995 of $115,000 and a corresponding decrease of
approximately $53,000 for the second quarter of 1996 as compared to the second
quarter of 1995. These decreases were offset by increased royalty income
recognized of approximately $92,000 for the six month period and approximately
$42,000 for the second quarter period, as a result of new store openings and the
refranchising of Company-owned Centers. Based upon many factors, including the
age of amounts owed the Company, the extent of collateralization, and historical
performance, the Company may place certain financially troubled franchisees on a
non-accrual status. For the first half of 1996, estimated royalties of $61,875
were not accrued under this policy, compared to $80,450 for the first half of
1995. During the second quarter of 1996, estimated royalties of $31,525 were
not accrued compared to $47,425 for the second quarter of 1995. The Company has
a royalty rebate program for franchisees under which eligible franchisees can
receive a rebate of royalties paid. For the first half of 1996, the rebate
accrued under this program was $125,715, compared to $116,864 for the first half
of 1995. The rebate accrued for the second quarter of 1996, was $64,788,
compared to a rebate of $64,295 for the second quarter of 1995. The rebate is
recorded as a reduction in royalty revenue.
The Company did not recognize any franchise sales net revenue during the
first six months or second quarter of 1996. Franchise sales net revenue was
$219,591 (representing twelve centers) for the first half of 1995. For the
second quarter of 1995, franchise sales net revenue was $116,375
(continued)
10
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (continued)
(representing six centers). Franchise sales revenue represents initial one-time
payments received by the Company from buyers of its franchises. The fee and any
directly related costs are recognized as revenue and expense when the related
franchise center opens for business.
At June 30, 1996, the Company operated 33 centers as compared to 29
centers at June 30, 1995. For the first six months of 1996, the Company
reported an operating margin (Company-owned Center sales less expenses,
excluding interest, depreciation and amortization) of $958,924 on revenue of
$7,063,639 at Company-owned Centers, as compared to an operating margin of
$684,681 on revenue of $5,975,756 for the same period last year. These
results represent an increase of 18% in revenue and 40% in operating margin.
For the second quarters of 1996 and 1995, the Company reported operating
margins of $522,151 and $417,719 on revenue of $3,778,367 and $3,129,075
respectively, representing increases in revenue of 21% and operating margin
of 25%.
On a same center basis, those Company-owned Centers operated continuously
over the period January 1, 1995 through June 30, 1996, representing 25 centers,
had an operating margin of $718,454 on revenue of $5,432,531 for the first
quarter of 1996, as compared to first quarter 1995 results of an operating
margin of $635,277 on revenue of $5,275,587. These results represent an
increase of 3% in revenue and 13% in operating margin. The same center
statistics for the second quarter of 1996 and 1995 were operating margins of
$377,744 on revenue of $2,728,401 and $378,795 on revenue of $2,713,270,
respectively.
In the first six months of 1996, the Company realized marketing allowances
and gross margins on product and equipment sales of $219,892, as compared to
$232,980 in the first six months of 1995. In the second quarter of 1996,
marketing allowances and gross margins on product and equipment sales were
$101,676, as compared to $112,401 in the second quarter of 1995. Product and
equipment revenue represents the sale of fluid dispensing equipment and other
supplies to franchisees, and marketing allowances relate to the sale of oil
filters, air filters, oil additives, and certain other products. The number of
center openings in a period impacts product and equipment revenue, thus revenue
for 1996 was below that of 1995. The marketing allowances relate to the number
of centers open and purchasing product. The loss of the eighteen centers as
described above had a minor negative impact on the marketing allowances
realized.
General and administrative expenses for the first six months and second
quarter of 1996 increased 12% or $246,405 and 16% or $156,862 as compared to the
first six months and second quarter of 1995. The primary factors causing this
variance include: increases in litigation legal fees of approximately $130,000
and $78,000 for the six month and second quarter periods, respectively;
increases in the general and administrative expenses at the Company-owned Center
Division of approximately $36,000 and $23,000 for the six month and second
quarter periods, respectively; and increases in franchise sales and advertising
expenses of approximately $36,000 and $19,000 for the six month and second
quarter periods, respectively. In addition, in the first six months of 1996 a
real estate settlement in the amount of $35,000 was incurred.
(continued)
11
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (continued)
Depreciation and amortization expense for the first six months and second
quarter of 1996 increased 13% and 22% respectively over the same periods in
1995. These increases are due to the net addition of four Company-owned Centers
during those periods.
Gain (loss) on sale of centers represents the net results of the
refranchising/disposal of Company-owned Centers. When the Company refranchises
a center, a franchise license fee is included in the sales price and included in
the resulting gain or loss on sale. The loss of ($3,412) for the six months
ended June 30, 1996, represents the refranchising of three Company-owned
Centers. The loss of ($16,841) for the six months ended June 30, 1995,
represents the refranchising of one Company-owned Center, and the refranchising
of one closed center.
In the first half of 1996, the Company recognized $27,563 in franchise
sales revenue resulting from license cancellations as compared to $4,000 in the
first half of 1995. Franchise sales revenue resulting from license
cancellations for the second quarter of 1996 was $27,563. There were no
license cancellations in the second quarter of 1995.
Interest expense includes interest on debt financing and interest
recorded on capital leases of Company-owned Centers. The addition of the
four Company-owned Centers, as mentioned above, accounts for the increase in
interest expense due to additional borrowings to acquire the centers and
interest expense related to capital leases entered into.
(continued)
12
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
The following schedule summarizes the activity with regard to Grease Monkey
Company-owned Centers as well as Grease Monkey franchised centers for the
six-months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
SIX MONTHS ENDED:
------------------------------------------------------------------------------------
JUNE 30, 1996 JUNE 30, 1995
---------------------------------------- -----------------------------------------
COMPANY FRANCHISEE COMPANY FRANCHISEE
OWNED OWNED TOTAL OWNED OWNED TOTAL
------- ---------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Centers open, beginning 29 181 210 29 176 205
Centers opened (A) - 1 1 - 12 12
Centers purchased 2 (2) - 1 - 1
Centers sold (3) 3 - (1) 1 -
Centers terminated or
closed (B) - (5) (5) - (5) (5)
Centers reacquired 5 (5) - - - -
--------- --------- ---------- ---------- --------- ---------
Centers open,
ending (C) 33 173 206 29 184 213
--------- --------- ---------- ---------- --------- ---------
--------- --------- ---------- ---------- --------- ---------
Vehicles serviced
(000's) 1,414 1,442
---------- ---------
---------- ---------
Franchise licenses
issued (D) 16 4
---------- ---------
---------- ---------
Undeveloped franchise
licenses (E) 51 48
---------- ---------
---------- ---------
Franchise applications
outstanding (E) 17 20
---------- ---------
---------- ---------
Franchise license/application
fees received (F) $318,800 $47,000
---------- ---------
---------- ---------
</TABLE>
(A) 1995 includes one refranchised center which was previously closed. 1996
includes one franchised center which was involved in a settlement with GMI
which resulted in GMI assuming possession of the Center in April 1996 and
thus no franchise revenue was recognized.
(B) 1995 includes one center which was deidentified by the franchisee in
January 1995; subsequently, the Company acquired the center on May 1, 1995.
(C) Includes 16 franchised centers in Mexico in 1996 and 14 franchised centers
in Mexico in 1995.
(D) Represents the number of licenses issued during the period.
(E) Represents the number of licenses/applications outstanding at June 30.
(F) Represents amounts received for franchise licenses/applications during the
period.
(continued)
13
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES
During May 1996, the Company entered into a Business Loan Agreement with a
major bank. Under the Loan Agreement, a $2,000,000 three year line of credit was
established. Loans drawn under the line are restricted to the development of
new quick-lube centers. The Company has the right to select an optional
interest rate as described in the agreement, however, in no case will the
interest rate exceed the bank's reference rate. In exchange for a supply
agreement on any centers built utilizing the line of credit, a motor oil
supplier agreed to guarantee the line.
During April 1995, the Company entered into two agreements with a motor oil
supplier - a Loan Agreement and a Fast Lube Supply Agreement. Under the Loan
Agreement, a $2,400,000 line of credit was established. All loans drawn under
this line accrue interest at 9% per annum and are repaid in quarterly
installments over a ten year period from date of disbursement. The line is
secured by the assignment of leases and lubrication equipment of certain
Company-owned Centers. As of June 30, 1996, the Company had drawn approximately
$2,056,000 of which $1,900,000 remains outstanding. The balance of the funds
available under the line are restricted to the acquisition or construction of
new fast lube centers. Under the Fast Lube Supply Agreement, the Company is
required to purchase at least 85% of the petroleum products for such Centers
from the supplier, the Company is required to meet certain minimum annual
purchase requirements and the Company is required to feature the supplier's
products in such Centers.
Another motor oil supplier has provided financing for Company-owned
Centers where the Company agrees to feature its products. The financing
ranges from $30,000 to $45,000 per Center depending on the expected usage at
the Center. The advances are amortized based on the Company's purchases of
its products. Similar oil company financing is expected to be available for
any new Company-owned Centers acquired and existing Company-owned Centers
where the Company does not have a supply agreement or where the existing
supply agreement may be canceled.
The growth of the Grease Monkey system is dependent on the ability of the
Company and its franchisees to obtain real estate development capital.
Historically, Grease Monkey Centers have been built utilizing build-to-suit
services, whereby the land is purchased and the building is constructed to GMI's
specifications, then leased to GMI or to a franchisee, by a third party.
However, the franchisees have moved toward purchasing and developing the real
estate for their own account, thereby creating greater value in their business.
Development of GMI-owned Centers will continue to utilize build-to-suit capital
for expansion.
(continued)
14
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
LIQUIDITY
Cash provided by operations during the first six months of 1996 was
$260,709 as compared to cash used in operations of ($91,887) in the first six
months of 1995. The most significant factors contributing to this variance are
the sale of franchise licenses and an improved operating margin at Company-owned
Centers. As mentioned above, as franchise licenses are sold, the revenue is
deferred until the center opens for business. For the first six months, cash
collections on franchise sales increased from $47,000 in 1995 to $318,800 in
1996. This increase will result in income in future periods as the Centers
open.
Cash used in investing activities was ($494,496) in the first six months of
1996, as compared to cash used in investing activities of ($826,848) in the
first six months of 1995. Cash provided in both quarters consisted primarily of
receipts on direct financing leases which remained relatively constant over the
periods. Additional cash was received in the first six months of 1996 and 1995
with the refranchising of three and two Company-owned Centers, respectively.
Cash used in investing activities for the first six months of 1996 and 1995
consisted primarily of cash used to purchase Centers. Additional cash was used
in both quarters for capital expenditures, primarily computer systems and
Company Center equipment. Additionally, cash was used in the first six months
of 1996 for the buy-out of leases of automobiles used by field employees.
Cash provided by financing activities was $131,022 in the first six months
of 1996 as compared to cash provided by financing activities of $1,044,389 in
the first six months of 1995. Cash provided by financing activities in the
first six months of 1996 consisted primarily of proceeds from long-term debt
related to the purchase of automobiles (as described above), an equipment loan
from a motor oil supplier, and a draw on a line of credit for the financing of
the acquisition of two franchised Centers. Cash provided by financing
activities in the first six months of 1995 consisted primarily of proceeds from
long-term debt (related to the facility described previously) of $1,241,880 and
the release of $110,608 of restricted cash to operating cash. Financing
activities also included cash used to reduce long-term debt and capital lease
obligations of $393,473 in the first six months of 1996 and $292,457 in the
first six months of 1995.
The Company does not have any material commitments for capital
expenditures. The Company believes it has the capital resources and liquidity
necessary to meet all of the obligations, debt maturities, and commitments of
the Company during 1996.
15
<PAGE>
GREASE MONKEY HOLDING CORPORATION
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED JUNE 30, 1996
FORM 10-QSB
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is a party to legal proceedings including claims by franchisees
against the Company that arise in the ordinary course of business. In the
opinion of management, the outcome of these matters will not have a material
effect on the financial condition, results of operations or cash flows of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 11, 1996, the Company held its annual meeting of shareholders. The
Company's shareholders elected the following eight persons as directors, each to
serve until the next annual meeting of shareholders or until his successor is
elected and qualified: Rex L. Utsler, Jerry D. Armstrong, James B. Wallace,
George F. Wood, Wayne H. Patterson, Charles E. Steinbrueck, Jim D. Baldwin and
Cortlandt S. Dietler. The Company's shareholders also voted to amend Article IV
of the Company's Articles of Incorporation to increase the authorized shares of
Common Stock with a par value of $0.03 per share to 20,000,000 shares. The
number of shares voted for or against each director and the Amendment were as
follows:
ELECTION OF DIRECTORS FOR WITHHOLD
Jerry D. Armstrong 3,473,745 14,694
Jim D. Baldwin 3,473,425 15,014
Cortlandt S. Dietler 3,473,364 15,075
Wayne H. Patterson 3,473,358 15,081
Charles E. Steinbrueck 3,473,391 15,048
Rex L. Utsler 3,473,678 14,761
James B. Wallace 3,473,866 14,573
George F. Wood 3,473,317 15,122
Approval to amend Article IV of the Company's Articles of Incorporation to
increase the authorized shares of Common Stock with a par value of $0.03 per
share to 20,000,000 shares.
FOR AGAINST ABSTAIN NOT VOTED
3,452,423 29,363 6,619 34
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (numbered in accordance with Item 601 of regulation S-K)
3. Articles of Incorporation and Bylaws.
(a) Articles of Amendment to the Articles of Incorporation of Grease
Monkey Holding Corporation
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the period covered by this report.
17
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED JUNE 30, 1996
FORM 10-QSB
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREASE MONKEY HOLDING CORPORATION
By:/s/ T. Timothy Kershisnik
---------------------------------------------
T. Timothy Kershisnik
Controller, Treasurer and
Corporate Secretary
(Principal Financial and
Accounting Officer)
Denver, Colorado
August 9, 1996
18
<PAGE>
ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION
OF GREASE MONKEY HOLDING CORPORATION
Pursuant to the provisions of the Utah Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is GREASE MONKEY HOLDING CORPORATION.
SECOND: The following amendment of the Articles of Incorporation was
adopted by the shareholders of the Corporation in the manner prescribed by the
Utah Business Corporation Act:
The first sentence of Article IV is amended so
as to read as follows:
"ARTICLE IV
CAPITALIZATION
The aggregate number of shares that the
Corporation shall have the right to issue is:
20,000,000 shares of Common Stock
with a par value of $0.03 per share,
each of which shall have equal voting
rights; and 200,000 shares of Preferred
Stock."
The remainder of Article IV shall remain unchanged.
THIRD: The date upon which the above Amendment was adopted by the
shareholders holding a majority of the Corporation's outstanding common stock
was June 11, 1996.
FOURTH: The number of shares of the Corporation's common stock
outstanding at the time of such adoption was 4,459,889; the number of shares
entitled to vote thereon was 4,459,889; the number of votes indisputably
represented at the meeting, was 3,488,439. No shares of the Corporation's
preferred stock were entitled to vote on this amendment. No voting groups were
entitled to vote separately on this amendment.
<PAGE>
FIFTH: The number of shares voted for or against such Amendment were as
follows:
AMENDMENT NUMBER OF SHARES VOTED
FOR AGAINST ABSTAIN NOT VOTED
Article IV 3,452,423 29,363 6,619 34
Done this 6th day of August, 1996.
GREASE MONKEY HOLDING CORPORATION
BY:/s/ Rex L. Utsler, President
--------------------------------------
Rex L.Utsler, President
BY:/s/ T. Timothy Kershisnik, Secretary
--------------------------------------
T. Timothy Kershisnik, Secretary
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
Subscribed and sworn to before me this 6th day of August, 1996, by Grease
Monkey Holding Corporation, by and through Rex L. Utsler, President, and T.
Timothy Kershisnik, Secretary of the Corporation.
Witness my hand and seal.
/s/ Terry Amalfitano
------------------------------
Notary Public
My Commission expires: 02/18/2000
----------------
-2-
<PAGE>
EXHIBIT 11
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
<TABLE>
<CAPTION>
Quarters Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income (loss). . . . . . . . . . . . . . . . . . . . $ (71,934) 49,520 (193,974) 59,981
Dividends on preferred stock . . . . . . . . . . . . . . (31,259) (31,367) (62,561) (63,240)
----------- ----------- ----------- -----------
Net income (loss) applicable to common stock . . . . . . $ (103,193) 18,153 (256,535) (3,259)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Common shares outstanding. . . . . . . . . . . . . . . . 4,359,888 4,362,080 4,359,888 4,362,080
Effect of using weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . . . (2,578) (824) (8,753) (14,290)
Effect of shares issuable under common stock warrants
using the treasury stock method . . . . . . . . . . . * 115,385 * *
Effect of shares issuable under stock options using
the treasury stock method. . . . . . . . . . . . . . * 14,495 * *
----------- ----------- ----------- -----------
Shares used in computing primary earnings per share. . . 4,357,310 4,491,136 4,351,135 4,347,790
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary earnings per common share. . . . . . . . . . . . $ (0.02) ** (0.06) **
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
FULLY DILUTED EARNINGS PER SHARE
Net income (loss). . . . . . . . . . . . . . . . . . . . $ (71,934) 49,520 (193,974) 59,981
Dividends on preferred stock . . . . . . . . . . . . . . (31,259) (31,367) (62,561) (63,240)
----------- ----------- ----------- -----------
Net income (loss) as adjusted. . . . . . . . . . . . . . $ (103,193) 18,153 (256,535) (3,259)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Shares used in computing primary earnings
per share . . . . . . . . . . . . . . . . . . . . . . 4,357,310 4,491,136 4,351,135 4,347,790
Effect of shares issuable upon conversion of
preferred stock . . . . . . . . . . . . . . . . . . . * * * *
----------- ----------- ----------- -----------
Shares used in computing fully diluted earnings
per share . . . . . . . . . . . . . . . . . . . . . . 4,357,310 4,491,136 4,351,135 4,347,790
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully diluted earnings per common share. . . . . . . . . $ (0.02) ** (0.06) **
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
* Antidilutive
** Less than $.01 per share
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 1-3 OF THE COMPANY'S FORM 10-QSB FOR THE YEAR-TO-DATE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 282,402
<SECURITIES> 0
<RECEIVABLES> 1,889,272
<ALLOWANCES> 340,059
<INVENTORY> 872,551
<CURRENT-ASSETS> 2,743,991
<PP&E> 9,044,702
<DEPRECIATION> 3,234,731
<TOTAL-ASSETS> 15,070,602
<CURRENT-LIABILITIES> 2,364,851
<BONDS> 3,230,396
0
2,089,638
<COMMON> 130,797
<OTHER-SE> (467,298)
<TOTAL-LIABILITY-AND-EQUITY> 15,070,602
<SALES> 0
<TOTAL-REVENUES> 9,755,938
<CGS> 0
<TOTAL-COSTS> 9,666,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 58,346
<INTEREST-EXPENSE> 317,231
<INCOME-PRETAX> (193,974)
<INCOME-TAX> 0
<INCOME-CONTINUING> (193,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193,974)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
