FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended : June 30, 1998
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-11927
Moto Photo Inc.
(Exact name of registrant as specified in its charter)
Delaware 31-1080650
(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or organization)
4444 Lake Center Dr. Dayton, OH 45426
(Address of principal executive offices with Zip Code)
(937) 854-6686
(Registrant's telephone number, including area code)
No Change
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
As of July 31, 1998:
7,812,673 - Voting Common, 0 - Non - Voting Common
<TABLE>
MOTO PHOTO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
June 30, December
31,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 901,438 $ 3,139,252
Accounts receivable, less allowances of $1,420,000
in 1998 and $1,590,000 in 1997 3,667,324 4,416,899
Notes receivable, less allowances of $125,000 in 403,669
1998 and 1997 437,669
Inventory 1,774,462 1,388,010
Deferred tax assets 1,025,000 1,025,000
Prepaid expenses 356,786 223,176
Total current assets 8,162,679 10,596,006
Property and equipment 3,012,093 3,095,006
OTHER ASSETS:
Notes receivable, less allowances of $1,251,000 in
1998 and $893,000 in 1997 1,867,093 2,157,360
Cost of franchises and contracts acquired 172,047 167,741
Goodwill 3,810,815 3,932,883
Deferred tax assets 57,000 57,000
Other assets 1,444,167 1,032,119
Total assets $18,525,894 $21,038,115
</TABLE>
<TABLE>
MOTO PHOTO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,827,593 $ 3,206,342
Accrued payroll and benefits 557,064 1,060,188
Accrued expenses 1,199,029 1,472,306
Current portion of long-term obligations 1,391,000 1,444,000
Other 296,381 181,286
Total current liabilities 5,271,067 7,364,122
Long-term obligations 9,447,014 9,783,805
Deferred revenue 119,032 119,032
Total liabilities 14,837,113 17,266,959
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value:
Authorized shares - 2,000,000:
Series G cumulative nonvoting preferred shares,
1,000,000 shares issued and outstanding with
preferences aggregating $10,000,000 10,000 10,000
Common shares $.01 par value:
Authorized shares - 30,000,000
Issued and outstanding shares - 7,812,673 in 1998
and 7,793,573 in 1997 78,127 78,030
Paid-in capital 6,532,101 6,670,981
(Deficit) retained earnings subsequent to
June 30, 1991 (2,931,447) (2,987,855)
Total stockholders' equity 3,688,781 3,771,156
Total liabilities and stockholders' equity $18,525,894 $21,038,115
</TABLE>
<TABLE>
MOTO PHOTO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES
Company store sales $3,448,618 $ 4,491,315 $ 6,184,199 $ 8,032,902
Merchandise sales 4,487,113 4,751,845 7,580,796 8,251,984
Royalties 1,318,605 1,239,749 2,351,862 2,309,541
Franchise fees 36,750 214,435 59,000 260,205
Investment income 98,490 60,228 192,957 149,814
Telemarketing revenue 142,763 233,846 254,966 448,720
9,532,339 10,991,418 16,623,780 19,453,166
EXPENSES
Company store cost of sales
and operating expenses 2,824,261 3,614,868 5,441,412 6,909,577
Merchandise cost of sales
and operating expenses 3,917,788 4,144,429 6,744,665 7,230,816
Selling, general, and
administrative costs 1,593,967 1,790,432 2,943,834 3,490,659
Advertising 347,389 351,710 605,073 636,652
Depreciation and amortization 224,227 203,827 434,987 403,022
Interest expense 112,859 120,062 210,599 200,283
9,020,491 10,225,328 16,380,570 18,871,009
Income before income taxes 511,848 766,090 243,210 582,157
Income tax expense (116,000) (237,500) (49,000) (180,500)
Net income 395,848 528,590 194,210 401,657
Preferred stock dividend
requirements (68,904) (70,964) (138,328) (142,434)
Net income applicable to
common stock $ 326,944 $ 457,626 $ 55,882 $ 259,223
Net income per common share $ 0.04 $ 0.06 $ 0.01 $ 0.03
Weighted average shares
outstanding - Basic 7,809,581 7,791,832 7,807,074 7,789,869
Weighted average shares
outstanding - Diluted 7,932,520 7,856,275 7,995,479 7,851,904
</TABLE>
<TABLE>
MOTO PHOTO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASHFLOWS
(UNAUDITED)
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 194,210 $ 401,657
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 434,987 403,022
Provision for losses on inventory and
receivables 249,680 397,178
Write off of assets due to store closings 32,257 -
Loss on disposition of assets 65,672 43,432
Issuance of stock for directors fees 23,413 14,060
Increase (decrease) resulting from changes in:
Accounts receivable 466,247 (61,214)
Inventory and prepaid expenses (544,062) (170,206)
Other assets (462,563) 3,735
Accounts payable and accrued expenses (2,131,737) (3,292,084)
Deferred revenues and other liabilities 115,095 381,396
Net cash used in operating activities (1,556,801) (1,879,024)
INVESTING ACTIVITIES
Purchases of equipment and leaseholds (247,491) (96,292)
Payments received on notes receivable 256,269 233,666
Net cash provided by investing activities 8,778 137,374
FINANCING ACTIVITIES
Proceeds from revolving line of credit and
borrowings - 8,824,274
Principal payments on revolving line of credit,
long-term debt and capital lease obligation (389,791) (6,925,845)
Payment of preferred dividends (300,000) (300,000)
Net cash (used in) provided by financing
activities (689,791) 1,598,429
Decrease in cash and cash equivalents (2,237,814) (143,221)
Cash and cash equivalents at beginning of period 3,139,252 1,398,944
Cash and cash equivalents at end of period $ 901,438 $1,255,723
</TABLE>
MOTO PHOTO, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
``UNAUDITED''
1.In the opinion of management, the accompanying financial statements
contain all adjustments necessary to present fairly the financial position
and results of operations for the period covered in this report. These
statements should be read in conjunction with the Notes to the
Consolidated Financial Statements for the year ended December 31,1997.
The internal accounting for the Company is on a fiscal calendar quarter
basis. The fiscal quarter dates may vary from the calendar quarter dates,
(i.e. June 27 vs. June 30 for the second quarter 1998), except for the
fourth quarter which ends on December 31. The differences in interim
periods are immaterial.
2.The first six months of the year are seasonally slower and do not
represent 50% of the year.
3.In the first six months of 1998 $300,000 of dividends were paid on the
Series G preferred shares. Of this amount $161,672 was for previously
reported and accreted dividends.
4.In the first six months of 1997, the Company incurred capital lease
obligations totaling $452,000 in connection with equipment purchases.
5.Certain amounts from prior periods have been restated to conform to the
current period presentation.
6.The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that
affect amounts reported in the financial statements. Actual results could
differ from those estimates.
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS SECOND QUARTER AND SIX MONTHS 1998 VS SECOND QUARTER
AND SIX MONTHS 1997
The Company reported net income of $395,848 and basic and diluted income per
common share of $.04 for the second quarter 1998, compared to net income of
$528,590 and basic and diluted income per common share of $.06 for the second
quarter 1997. For the six months ended June 30, 1998, the Company recorded
net income of $194,210 and basic and diluted earnings per common share of
$.01, compared to net income of $401,657 and basic and diluted earnings per
common share of $.03 for the same period a year ago. Per share calculations
are made after provision for Series G preferred dividend requirements.
Sales from Company stores were down $1,043,000, or 23% for the second quarter
1998, and down $1,848,000, or 23% on a year-to-date basis, compared to the
same period a year ago primarily due to fewer Company stores in operation.
The decrease was anticipated due to the sale of certain stores as franchises
and the planned closing of other Company stores.
Fewer Company stores also accounted for reduced Company store cost of sales
and operating expenses which fell $791,000, or 22% for the second quarter,
and $1,468,000, or 21% for the six months ended June 30, 1998.
Merchandise sales decreased $265,000, or 6% for the second quarter of 1998,
and $670,000, or 8% on a year-to-date basis, as a result of fewer system
stores and lower pricing in 1998 as compared to 1997. Accordingly,
merchandise cost of sales and expenses decreased $227,000 or 5% for the
second quarter, and $486,000, or 7% through June 1998.
Royalty revenues increased $79,000, or 6% for the second quarter, and
$42,000, or 2% for the six months ended June 30, 1998, compared to the same
period a year ago primarily due to increased franchisee store sales.
Franchise fees were down $178,000, or 83% for the quarter, and $201,000, or
77% for the six months ended June 30, 1998, compared to the same period a
year ago due to fewer franchise store openings in 1998.
Investment income increased $38,000, or 64% for the quarter, and $43,000, or
29% on a year-to-date basis, compared to the same period a year ago primarily
due to more notes receivable outstanding.
Telemarketing revenues were down $91,000, or 39% for the second quarter, and
$194,000, or 43% as of June 30, 1998, primarily due to emphasis on other
marketing programs and planned reliance on less sales to non-franchisees.
Advertising costs were down $4,000, or 1% for the quarter, and $32,000, or 5%
year-to-date due to planned reduced levels of Company store advertising.
Interest expense decreased $7,000, or 6% for the quarter, but increased
$10,000, or 5% year-to-date due to a change in the levels of interest bearing
debt.
YEAR 2000
The Company is working to resolve the potential impact of the year 2000 on
the ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's
programs that recognize a date using ``00' as the year 1900 rather than the
year 2000 could result in errors or system failures. The Company utilizes a
number of computer programs across its entire operation. The Company has not
completed its assessment, but currently believes that costs of addressing
this issue will not have a material adverse impact on the Company's financial
position.
LIQUIDITY AND CAPITAL RESOURCES
The reduction in accounts receivable can be attributed to tighter credit
policies and fewer Company stores in 1997 as compared to 1998. The Company
anticipates opening additional stores during the remainder of 1998, which
would change this trend but should lead to increased operating earnings.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Canadian Industrial Services Limited v. Hidome Investments Ltd. and Herbert Lam
(Ontario [Canada] Court (General Division, Case No. 97-CU-118907). Canadian
Industrial Services (`CIS''), the Company's Canadian master franchisor, filed
this lawsuit February 14, 1997, against one of its former franchisees, Hidome
Investments Ltd. (`Hidome'') and its owner, Herbert Lam. Hidome had abandoned
the franchise which it had purchased from Northvale Industrial Co. Ltd.
(`Northvale''). CIS sought damages of $418,740.33. On April 3, 1997, Hidome
filed a counterclaim against CIS, Northvale, and the Company, alleging
fraudulent and negligent misrepresentation and breach of contract and seeking,
among other things, damages of $600,000. On July 15, 1998, the parties signed a
settlement agreement, pursuant to which Hidome paid CIS $60,000 and the parties
released all claims against each other. The lawsuit was dismissed with
prejudice on July 16, 1998.
The Company has pending against it a small number of claims which it believes
are routine and incidental to the business. These actions are being contested
and defended. Management of the Company is of the opinion that such actions are
not likely to result in any liability which would have a material adverse effect
on the consolidated financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) On June 18, 1998, the Company held its annual meeting of
shareholders.
(c) At the meeting the shareholders voted on the election of
directors and on an amendment to the 1992 Performance and Equity
Incentive Plan (`the Plan'') to increase by 750,000 the number of
shares available for distribution under the Plan and to add outside
directors as eligible participants under the Plan.
The shareholders voted on the election of the following directors. The voting
tabulation for each director is set next to his name.
Votes For Votes Withheld
Michael F. Adler 7,172,220 84,372
Frank W. Benson 7,002,965 253,627
D. Lee Carpenter 7,186,220 70,372
Leslie Charm 7,003,165 253,427
Dexter B. Dawes 7,002,865 253,727
Harry D. Loyle 7,186,120 70,274
David A. Mason 7,153,520 103,072
James. F. Robeson 7,185,920 70,672
The shareholders approved the amendment to the Plan, voting as follows:
Shares Voting For - 4,264,681
Shares Abstaining - 263,926
Shares Voting Against - 597,385
Broker Non-Votes - 2,130,699
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: See Exhibit Index immediately preceding exhibits.
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K
during the quarter ended June 30, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MOTO PHOTO, INC.
By /s/ David A. Mason
David A. Mason
Executive Vice President,
Treasurer, and Chief
Financial Officer
Date: August 13, 1998
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1998
Copies of the following documents are filed as exhibits to this report:
No. Description
*10.1 1992 Moto Photo Performance and Equity Incentive Plan and Amendment
No. 1 to the Plan, as amended through April 11, 1995 (Incorporated by
Reference to Exhibit 4.1 to Registration Statement Number 033-59673 on
Form S-8 dated May 30, 1995)
*10.2 Amendment No. 2 to the 1992 Moto Photo Performance and Equity
Incentive Plan
10.3 First Amendment to Loan and Security Agreement, dated as of May 1,
1998, by and between Moto Photo, Inc. and The Provident Bank
11.0 Computation of Per Share Earnings
27.0 Financial Data Schedule
AMENDMENT NO. 2
TO
1992 PERFORMANCE AND EQUITY INCENTIVE PLAN
OF
MOTO PHOTO, INC.
(AS ADOPTED EFFECTIVE APRIL 3, 1998)
A.On April 20, 1992, the Board of Directors of Moto Photo, Inc., a Delaware
corporation (the ``Corporation''), adopted and on July 15, 1992, the
shareholders approved, the Corporation's 1992 Performance and Equity
Incentive Plan (the ``Plan''). The Board of Directors has the authority
pursuant to Section 17 of the Plan to amend the Plan from time to time and
deems it desirable and in the best interests of the Corporation to amend the
Plan to increase the number of shares of Common Stock authorized for issuance
for all purposes under the Plan and to add non-employee directors as eligible
participants under the Plan.
B.The amendment of the Plan set forth herein shall be conditioned upon, and is
subject in all respects to, the approval of the shareholders of the
Corporation as required under Section 17 of the Plan. If such approval is
not obtained, this amendment shall be of no further force or effect.
NOW THEREFORE, BE IT RESOLVED, that the Plan be amended as follows:
1.The first paragraph of Section 4(b) of the Plan is hereby amended to
read in its entirety as follows:
``The maximum number of shares of Common Stock in respect of which
Awards may be granted under the Plan, subject to adjustment as provided
in Section 15 of the Plan, is 2,000,000 shares.
2.Section 5 of the Plan is hereby amended to add an additional paragraph
thereunder to read in its entirety as follows:
``Non-employee directors of the Corporation shall also be eligible for
Awards under the Plan and any reference in the Plan to a requirement
based on the employment of a Participant shall be deemed to refer to
continued service as a director by a director who becomes a
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
dated effective as of May 1, 1998, is made by and between MOTO PHOTO, INC., a
Delaware corporation, (hereinafter called "Borrower"), and THE PROVIDENT BANK,
an Ohio banking corporation, (hereinafter called "Bank").
WITNESSETH:
WHEREAS, Borrower and the Bank entered into a Loan and Security Agreement
dated February 19, 1997 (the "Loan Agreement"), providing for, among other
things, a line of credit loan from Bank to Borrower;
WHEREAS, in addition to the line of credit loan, Bank made, among other
loans, an overline loan to Borrower;
WHEREAS, Borrower and Bank wish to amend the terms of the Loan Agreement
to: (1) reduce the interest rate, decrease the maximum credit amount and extend
the maturity of the line of credit loan; (2) terminate the overline loan; (3)
provide another facility to Borrower for capital expenditures; and (4) to modify
certain other terms and conditions of the loans provided for therein.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the Bank and Borrower hereby agree, as follows:
1. Section 2.1(i) of the Loan Agreement, is hereby revised and replaced
in part, to read as follows:
2.1 Loans. The Bank shall make a total of four (4) loans to the
Borrower, on the terms and conditions contained herein, consisting of an
Automated Line of Credit Loan (`Line of Credit Loan''), a Fixed Rate Term Loan
and a Variable Rate Term Loan (collectively `Term Loans''), and a Capital
Expenditure Facility (`Capital Expenditure Loan''). All loans shall be herein
collectively called the `Loans''.
(i) Line of Credit. Subject to the terms and conditions of this
Agreement, the Bank agrees to lend and re-lend to the Borrower at any time and
from time to time on and after the date hereof and prior to April 30, 2000, an
aggregate principal amount not to exceed at any one time outstanding, the lesser
of (i) $2,000,000 or (ii) the then-current Borrowing Base, as defined herein,
(the lesser of (i) or (ii) being referred to hereinafter as the `Maximum Line
of Credit Loan Amount').
From time to time, during the term of the Line of Credit Loan,
Bank may request, and Borrower shall provide Bank within ten (10) days of such
request, with a true and correct Borrowing Base Certificate, in the form
attached hereto as Exhibit A, stating the Borrowing Base for the preceding
month. Borrower shall on demand immediately repay any amounts outstanding that
are in excess of the aggregate of the Maximum Line of Credit Loan Amount. All
such loans will be made from time to time, and neither this Agreement nor any
loans or other action by the Bank shall obligate the Bank to make further loans
to the Borrower. Such loans may be made in excess of the Maximum Line of Credit
Loan Amount in the sole discretion of the Bank.
2. Section 2.1(iv), Overline Loan, is hereby deleted and Section 2.1 (iv)
of the Loan Agreement is hereby revised and replaced in its entirety to read as
follows:
(iv) Capital Expenditure Loan. Subject to the terms and conditions of
this Agreement, the Bank agrees to lend and re-lend to the Borrower at any time
and from time to time on and after the date hereof and prior to April 30, 1999
(the `Draw Period''), an aggregate principal amount not to exceed at any one
time outstanding, $1,250,000 ("Maximum Capital Expenditure Loan Amount").
Funds advanced under the Capital Expenditure Loan shall be used
to finance Borrower's capital expenditures. All such loans hereunder will be
made from time to time in the reasonable discretion of the Bank, and neither
this Agreement nor any loans or other action by the Bank shall obligate the Bank
to make further loans to the Borrower. Notwithstanding the foregoing, Bank
shall be required to make loans hereunder to Borrower provided that no Event of
Default, as hereinafter defined, exists or is continuing.
3. Subparagraphs (a) and (c) of Section 5.15, Financial Covenants, are
hereby revised and replaced in their entirety to read as follows:
(a) A ratio of Consolidated Liabilities to Consolidated Net Worth of
not more than 6.0 to 1.0 at the end of the fiscal quarter of
Borrower ending on the last day of June 30, 1998 and at the end
of each fiscal quarter thereafter.
(c) A capital expenditure limit of $2,000,000 per calendar year
during the term of this Agreement.
4. Section 6.3, Contingent Liabilities, is hereby revised and replaced in
its entirety to read as follows:
Contingent Liabilities. Endorse, guarantee or become surety for the
obligations of any person, firm or corporation, except that the Borrower may:
(i) endorse checks and negotiable instruments for collection or deposit in the
ordinary course of business, (ii) guarantee or become a surety for the leases or
other obligations of any franchisees in connection with the operation by such
franchisees of a franchise (`Franchisee Obligations''), provided, however, that
the total aggregate amount of all such Franchisee Obligations (other than
obligations on leases existing as of the date of the effective date of this
Amendment) shall not exceed $500,000 during the term of the Loan Agreement;
(iii) do so pursuant to that certain Project Agreement between Borrower and Fuji
Photo Film USA, Inc., under date of February 6, 1998, for the Moto Photo Quick
Start Program; and (iv) become obligated under leases or other obligations in
connection with the lease of a store site for which the Borrower did not have a
franchisee at the time the lease was executed ("Store Lease Obligations"),
except that, Borrower may not be or become obligated for more than ten (10)
store leases at any one time.
5. Section 6.10, Indebtedness, is hereby revised and replaced in its
entirety to read as follows:
Indebtedness. Directly or indirectly create, incur, assume, guaranty
or be or remain liable with respect to any indebtedness, except for (a) the
Obligations, (b) any existing indebtedness disclosed in the financial statements
referenced in Section 4.4 hereof, (c) any purchase money indebtedness not to
exceed $750,000 per year, (d) any Franchisee Obligations (other than obligations
on leases existing as of the date of this Agreement) not to exceed $500,000
during the term of the Loan Agreement, as provided in Section 6.3 hereof, (e)
any Store Lease Obligations authorized pursuant to Section 6.3(iv) of the Loan
Agreement as amended, which Store Lease Obligations shall not relate to more
than ten (10) locations at any one time.
6. Conditions Precedent. The obligations of the Bank to enter into this
Amendment and to continue to make advances under the Note(s) to Borrower are
conditioned upon Borrower delivering to Bank the following documents, in form
and substance satisfactory to the Bank and satisfaction of the following
conditions:
A. Properly executed: (i) Amended and Restated Line of Credit
Promissory Note; (ii) First Amendment to Loan and Security Agreement; and (iii)
Capital Expenditure Promissory Note;
B. Certified copy of a resolution of the board of directors of
Borrower authorizing the execution and delivery of this Amendment, the Amended
and Restated Line of Credit Promissory Note and the Capital Expenditure
Promissory Note, the borrowing contemplated herein, the pledging of assets, and
the assumption of all other undertakings provided for herein;
C. Borrower shall have paid all reasonable fees and expenses
incurred by the Bank with respect to this Amendment, including, but not limited
to, legal fees;
D. Bank shall have returned the original executed copy of the
Overline Note to Borrower marked `cancelled''; and
E. Such other documents as Bank or its counsel may reasonably
request.
7. Representations and Warranties. In order to induce the Bank to enter
into this Amendment, Borrower hereby makes and restates in their entirety all of
the representations and warranties set forth in Section 4 of the Loan Agreement,
except that those representations and warranties regarding financial statements
shall refer to the financial statements as of and for the last period submitted
by Borrower to Bank, which representations and warranties are true in all
material respects as of the date of this Amendment and shall survive the
execution and delivery of this Amendment, the Amended and Restated Line of
Credit Promissory Note and the Capital Expenditure Promissory Note.
8. Effect of this Amendment; Continuation of Loan Agreement. Borrower
and the Bank agree that:
(a) the execution and delivery of this Amendment is not intended to
discharge any obligation of Borrower due the Bank under the Loan Agreement or
this Amendment;
(b) there is no novation by the execution and delivery of this
Amendment;
(c) all the terms and conditions contained in the Loan Agreement, as
amended, and all documents executed in accordance therewith, except as
specifically modified herein, shall continue unchanged and remain in full force
and effect; and
(d) Capitalized terms used in this Amendment and not defined herein
shall have the meanings attributed to them in the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment duly to
be executed as of the day and year first above written.
MOTO PHOTO, INC.
(a Delaware corporation)
By:
--------------------------------
DAVID A. MASON
Its: Executive Vice President
THE PROVIDENT BANK
By
-----------------------------------
Terri Meadows
<TABLE>
EXHIBIT 11.0
MOTO PHOTO INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
30-JUNE-98 30-JUNE-97 30-JUNE-98 30-JUNE-97
<S> <C> <C> <C> <C>
Numerator:
Net income $ 395,848 $ 528,590 $ 194,210 $ 401,657
Preferred stock dividend (68,904) (70,964) (138,328) (142,434)
requirement
Numerator for basic earnings
per share-- income available
to common shareholders 326,944 457,626 55,882 259,223
Effect of dilutive securities: - - - -
Numerator for diluted earnings
per share-- income available
to common stockholders after
assumed conversions $ 326,944 $ 457,626 $ 55,882 $ 259,223
Denominator:
Denominator for basic earnings
per share-- weighted average
shares outstanding 7,809,581 7,791,832 7,807,074 ,789,869
Effect of dilutive securities:
Employee stock options
Dilutive potential common shares 122,939 64,443 188,405 62,035
Denominator for diluted
earnings per share-- adjusted
weighted average shares and
assumed conversions 7,932,520 7,856,275 7,995,479 7,851,904
Basic earnings per share $ 0.04 $ 0.06 $ 0.01 $ 0.03
Diluted earnings per share $ 0.04 $ 0.06 $ 0.01 $ 0.03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from Moto Photo
Inc.'s 1998 Second Quarter 10-Q and is qualified in its entirety by
reference to such 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 901,438
<SECURITIES> 0
<RECEIVABLES> 5,972,086
<ALLOWANCES> 2,796,000
<INVENTORY> 1,774,462
<CURRENT-ASSETS> 8,162,679
<PP&E> 3,012,093
<DEPRECIATION> 8,080,407
<TOTAL-ASSETS> 18,525,894
<CURRENT-LIABILITIES> 5,271,067
<BONDS> 0
0
10,000
<COMMON> 78,127
<OTHER-SE> 3,600,654
<TOTAL-LIABILITY-AND-EQUITY> 18,525,894
<SALES> 13,764,995
<TOTAL-REVENUES> 16,623,780
<CGS> 7,750,028
<TOTAL-COSTS> 12,186,077
<OTHER-EXPENSES> 1,040,060
<LOSS-PROVISION> 249,680
<INTEREST-EXPENSE> 210,599
<INCOME-PRETAX> 243,210
<INCOME-TAX> 49,000
<INCOME-CONTINUING> 194,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194,210
<EPS-PRIMARY> .01
<EPS-DILUTED> .07
</TABLE>
