UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-Q
(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, 1996
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number 0-2127
--------------------------------
GARMENT GRAPHICS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1270170
- -------------------------------------------------- --------------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
2260 Woodale Drive, Mounds View, MN 55112-4978
- -------------------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(612) 786-6220
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date: 3,081,128 shares of
common stock, $.001 par value, outstanding as of July 26, 1996.
<PAGE>
GARMENT GRAPHICS, INC.
Table of Contents
Page
Number
PART I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statement of Operations 5
Consolidated Statement of Shareholders' Equity 6
Consolidated Condensed Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations 10
Liquidity and Capital Resources 11
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURE PAGE 13
<PAGE>
GARMENT GRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1996 March 31, 1996
ASSETS (Unaudited)
------------- --------------
Current Assets
Cash $ 260,318 $ 20,301
Receivables:
Trade, less allowances, June 30, 1996 -
$179,493 and March 31, 1996 - $365,024 1,161,743 4,682,398
Income tax 421,064 507,052
Inventories 6,551,440 6,097,402
Prepaid expenses 647,135 338,374
Deferred tax assets 515,000 515,000
------------ ------------
Total current assets 9,556,700 12,160,527
------------ ------------
Property and Equipment, at cost
Equipment and furniture 1,824,897 1,813,171
Leasehold improvements 143,451 143,451
------------ ------------
1,968,348 1,956,622
Accumulated depreciation (1,231,871) (1,159,079)
------------ ------------
Net property and equipment 736,477 797,543
------------ ------------
NonCurrent Assets
Intangibles 367,125 377,187
Other 19,075 20,426
------------ ------------
Total noncurrent assets 386,200 397,613
------------ ------------
Total assets $ 10,679,377 $ 13,355,683
============ ============
See Notes to Consolidated Financial Statements.
<PAGE>
GARMENT GRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
June 30, 1996 March 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
------------- --------------
<S> <C> <C>
Current Liabilities
Notes payable -- bank (Note 2) $ 2,539,874 $ 5,637,020
Current portion -- long term debt 55,352 188,580
Accounts payable 3,653,596 3,449,472
Accrued expenses
Compensation 236,182 169,577
Royalties 478,720 679,754
Other 725,169 400,550
----------- -----------
Total current liabilities 7,688,894 10,524,953
----------- -----------
Long Term Debt, less current maturities 52,433 62,267
----------- -----------
Commitments and Contingencies (Notes 2, 3 and 4)
Shareholders' Equity
Preferred stock, par value $ .01 per share;
authorized 1,000,000 shares; no shares issued -- --
Common stock, par value $ .001 per share; authorized
50,000,000 shares; issued 3,081,128 and
3,075,186 shares 3,081 3,075
Additional paid - in capital 1,704,071 1,700,155
Retained earnings 1,230,899 1,065,233
----------- -----------
Total shareholders' equity 2,938,051 2,768,463
----------- -----------
Total liabilities and shareholders' equity $10,679,377 $13,355,683
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
GARMENT GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Quarter ended June 30, 1996 1995
----------- -----------
Net Sales $ 8,103,471 $ 7,321,340
Cost of Sales 5,943,148 5,722,013
----------- -----------
Gross profit 2,160,323 1,599,327
Selling and Administrative Expenses 1,777,376 1,561,480
----------- -----------
Income from operations 382,947 37,847
Miscellaneous Expense 0 9,011
Interest Expense 130,043 164,915
----------- -----------
Income (loss) before income taxes 252,904 (136,079)
----------- -----------
Income Tax Expense (Benefit) 87,237 (54,432)
----------- -----------
Net income (loss) $ 165,666 $ (81,647)
=========== ===========
Earnings (Loss) Per Common Share $ 0.05 $ (0.03)
=========== ===========
Weighted Average Common and Common
Equivalent Shares Outstanding 3,165,599 3,066,407
=========== ===========
See Notes to Consolidated Financial Statements.
<PAGE>
GARMENT GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
March 31, 1996 to June 30, 1996
Common Stock Additional
---------------------- Paid - In Retained
Shares Amount Capital Earnings Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1996 3,075,186 $ 3,075 $1,700,155 $1,065,233 $2,768,463
Issuance of common stock for
employee stock purchase plan 5,942 6 3,916 -- 3,922
Net Income for the quarter
ended June 30, 1996 -- -- -- 165,666 165,666
---------- ---------- ---------- ---------- ----------
Balance, June 30, 1996 3,081,128 $ 3,081 $1,704,071 $1,230,899 $2,938,051
========== ========== ========== ========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
GARMENT GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
<TABLE>
Quarter ended June 30, 1996 1995
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities $ (236,691) $ (682,554)
Cash Flows From Investing Activities (11,726) (30,910)
Cash Flows from Financing Activities
Principal payments on long-term borrowings (36,062) (61,564)
Net borrowings on bank/financing notes 524,496 750,000
----------- -----------
Net cash provided by financing activities 488,434 688,436
----------- -----------
Increase (decrease) in cash 240,017 (25,028)
Cash
Beginning 20,301 171,124
----------- -----------
Ending $ 260,318 $ 146,096
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 158,150 $ 162,747
Supplemental schedule of noncash investing and
financing activities
Common stock issued for employee stock purchase plan $ 3,922 $ --
----------- -----------
Debt retired with proceeds from factoring agreement $ 6,214,127 $ --
----------- -----------
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
GARMENT GRAPHICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the first quarter ended June 30, 1996, are not necessarily
indicative of the results that may be expected for the fiscal year ended March
31, 1997. For further information, refer to the financial statements and
footnotes included in the Company's financial statements for the year ended
March 31, 1996.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Signet, Inc. ("Signet"). Significant
intercompany transactions are eliminated in consolidation.
NOTE 2 - NOTE PAYABLE-BANK
Effective April 12, 1996, the Company entered into a two-year agreement
with Heller Financial, Inc. ("Heller") for the purpose of refinancing existing
bank debt and to provide additional working capital and credit protection
against customer bankruptcies in the retail industry through a credit and
receivable factoring program.
Under the terms of the agreement, Heller will provide the Company with
up to $9,000,000 via a Credit Facility. The facility provides for advances on
receivables of up to 85%, loans against eligible inventory of up to 55%, a
letter of credit facility of up to $1,000,000, and a 120 day $500,000
overadvance facility through August 1, 1996, secured by income taxes receivable.
Within the Credit Facility, the loans against inventory will have a limit of up
to $4,000,000. The interest rate on the Credit Facility will be at the National
Bank Reference Rate or "Prime Rate" plus one percent per annum. The prime rate
at April 12, 1996, through June 30, 1996, was 8.25%. The Company must meet
certain financial covenants relating to current ratio, working capital, net
worth and debt to equity ratio. In addition, the Company is restricted on paying
dividends, and would be required to pay a termination fee if the Company were to
cancel the agreement prior to the expiration of the agreement. The Company was
in compliance with all financial covenants as of June 30, 1996.
As part of the Credit Facility, Heller will provide its credit and
collection administration services for a fee and agree to purchase substantially
all of the Company's trade accounts receivable. At June 30, 1996, accounts
receivable carried at the Company's risk was $807,039, relating primarily to
accounts receivable balances assigned to Heller on the date the Credit Facility
was entered into. Heller will provide credit and collection administration on
these balances, and the Company anticipates no additional reserves will be
required. After April 12, 1996, Heller will assume the bad debt credit risk on
all approved accounts.
NOTE 3 - COMMITMENTS
The Company has entered into various licensing agreements which permit
it to manufacture and market apparel with copyrighted characters and logos.
Under the terms of these agreements, the Company is required to pay minimum
guaranteed fees to some licensors.
Remaining minimum annual obligations under these agreements are approximately:
Fiscal 1997 --- $762,000 and Fiscal 1998 --- $17,000.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company entered into a Lease Agreement with the Chairman of the
Board of the Company to lease a 97,740 square foot facility. The lease term is
for eight years and six months commencing December 1, 1996, with annual rental
of $368,400 for lease years one through five and annual rents of $384,188 for
the balance of the lease term.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, which establishes new standards for stock-based employee
compensation plans. The statement establishes a fair-value-based method of
accounting for stock-based compensation plans and encourages, but does not
require, entities to adopt that method in place of APB Opinion No. 25,
Accounting for Stock Issued to Employees. Entities that elect to continue under
Opinion No. 25 must disclose pro forma net income and earnings per share for all
years presented as if Statement No. 123 had been adopted.
The Company does not intend to adopt Statement No. 123 in measuring
expense; however it will present the proforma disclosures beginning in Fiscal
1997, and those pro forma amounts will likely reflect higher compensation
expense than the amounts shown in future statements of operations.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net Sales. Net sales for the first quarter of Fiscal 1997 ended June
30, 1996, increased 10.7% to $8,103,471 from $7,321,340 for the comparable
period in Fiscal 1996. The increase in net sales resulted primarily from a shift
in sales mix to higher priced garments. For the three months ended June 30,
1996, actual unit sales increased 1.0% compared with the same period in Fiscal
1996.
Gross Profit. Gross profit increased 35.1% to $2,160,323, or 26.7% of
net sales, for the first quarter of Fiscal 1997 compared to $1,599,327, or 21.8%
of net sales for the comparable period in Fiscal 1996. The dollar increase is
related to higher sales volume as described in Net Sales above. Also, while
labor costs increased 2.8% as a percentage of net sales for the first quarter of
Fiscal 1997, raw material costs decreased 6.5% as a percentage of net sales
compared with the same period in Fiscal 1996. Labor costs increased and product
costs decreased due to higher cost value processes added to the garment. This
includes more sophisticated graphic prints, multi-location prints and other
mixed media applications. In addition, shorter production runs resulted in
overtime requirements and higher per unit costs.
Selling and Administrative Expenses. Selling and Administrative
expenses increased 13.8% to $1,777,376 for the first quarter of Fiscal 1997 from
$1,561,480 for the first quarter of Fiscal 1996. The dollar increase relates
primarily to a 23.3% increase in royalty and commission expense for the first
quarter of Fiscal 1997 from the comparable period in Fiscal 1996 due to
increased sales levels. As a percent of sales, total Selling and Administrative
expenses for the first quarter of 1997 increased 0.6% compared with the same
period in Fiscal 1996. Commission and royalty expense increased 1.3% as a
percentage of Net Sales compared with the same period in 1996 relating to
changes in product mix and related commission and royalty rates. Excluding
commissions and royalties, Selling and Administrative expenses actually
decreased 0.7% for the quarter compared with the same period in Fiscal 1996.
Interest Expense. Interest expense decreased 21.1% to $130,043 for the
first quarter of Fiscal 1997, from $164,915 in first quarter of Fiscal 1996, due
to a decrease in average outstanding borrowings and also due to a decrease in
average borrowing rates.
Net Income (Loss). Net Income increased $247,313 to a profit of
$165,666 for the first quarter of Fiscal 1997 compared with a net loss of
$81,647 for the same period in Fiscal 1996. This increase in net income is
directly attributable to the increase in gross profit and selling and
administrative expense decreases discussed above.
Liquidity and Capital Resources
Current assets decreased 21.4% to $9,556,700 as of June 30, 1996, from
$12,160,527 as of June 30, 1995. The change relates primarily to a 75.2%
decrease in Accounts Receivable to $1,161,743 as of June 30, 1996, from
$4,682,398 as of June 30, 1995. This decrease is due to advances received by the
Company pursuant to the factoring agreement entered into on April 12, 1996, with
Heller Financial, Inc. The decrease in accounts receivable was partially offset
by a $454,038 increase in inventories due to planned build-up of certain
products in anticipation of increased sales as the Company enters the fall
selling season.
Current liabilities decreased 27.0% to $7,688,894 as of June 30, 1996,
from $10,524,953 at June 30, 1995. The decrease relates primarily to a decrease
in Notes Payable-Bank to $2,539,874 as of June 30, 1996, from $5,637,020 as of
June 30, 1995. This decrease is due to the classification of advances received
from Heller Financial, Inc. pursuant to the factoring agreement entered into on
April 12, 1996, as a reduction to accounts receivable.
The Company maintains substantial blank garment inventory levels in
order to be able to deliver products promptly to its customers. The seasonal
nature of the business and growth in the Company's sales has increased its
requirements for working capital resources to support ongoing inventory levels.
Net cash used by operating activities for the quarter ended June 30, 1996, was
$236,691 and for the quarter ended June 30, 1995, was $682,554.
The Company's business has historically been somewhat seasonal, with
the bulk of sales generally occurring in the second fiscal quarter as a result
of back-to-school sales. The next highest level generally occurs in the third
fiscal quarter due to sales reorders for back-to-school merchandise and the
holiday season. Working capital requirements reflect this seasonality.
The Company believes that its borrowings under existing credit
facilities, supplier support and internally generated funds will be adequate for
its liquidity and capital needs.
Cautionary Statement Regarding Forward Looking Information
The foregoing contains "forward looking statements" within the meaning
of federal securities laws which represent management's expectations or beliefs
concerning future events. These and other forward looking statements made by the
Company must be evaluated in the context of a number of factors that may affect
the Company's financial condition and results of operations, such as the recent
losses experienced by the Company, uncertain sales, dependency on new licenses
and others, including those set forth in the Company's annual and quarterly
reports filed with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
Item 1- Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Lease Agreement with R. Neil Hamlin dated
June 19, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GARMENT GRAPHICS, INC.
(Registrant)
Date: August 13, 1996 By: /s/ R. Neil Hamlin
R. Neil Hamlin
Chairman and Chief Executive Officer
By: /s/ Barbara S. Remley
Barbara S. Remley
President, Chief Operating and Financial
Officer (Principal Financial Officer and
Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Page Number
Exhibit in Sequential
Number Numbering System
10.1 Lease Agreement with R. Neil Hamlin dated *
June 19, 1996.
27 Financial Data Schedule *
LEASE
THIS LEASE is made as of June 19, 1996, by and between R. Neil Hamlin, an
individual ("Landlord") and Garment Graphics, Inc., a Minnesota corporation
("Tenant").
In consideration of the mutual covenants and agreements herein contained,
Landlord and Tenant hereby covenant and agree as follows:
1. Certain Defined Terms. The following terms shall have the following
meanings for all purposes of this Lease:
A. "Base Annual Rental" means $368,400.00 ($3.41 per square foot) for
Lease Years 1 through 5 and $394,188.00 ($3.65 per square foot) for
Lease Years 6, 7, 8 and the balance of the Lease Term.
B. "Base Monthly Rental" or "Monthly Rental" means an amount equal to
1/12 of the applicable Base Annual Rental.
C. "Lease Term" shall have the meaning set forth in Section 3 of this
Lease.
D. "Lease Year" means the 12-month period commencing on December 1, 1996
and each successive 12-month period thereafter.
E. "Premises" means the parcel or parcels of real estate located at 9445
East River Road, Coon Rapids, Minnesota, legally described in Exhibit
A attached hereto, all rights, privileges and appurtenances associated
therewith, and the building containing 97,740 square feet, all
fixtures and other improvements now or hereafter located thereon
(whether or not affixed to such real estate), commonly known as the
610 Business Center.
2. Demise of Premises. In consideration of the rentals and other sums to be
paid by Tenant and of the other terms, covenants and conditions on Tenant's
part to be kept and performed, Landlord hereby leases to Tenant, and Tenant
hereby takes and hires, the Premises.
3. Lease Term. The Lease Term shall be 8 years 6 months, commencing on
December 1, 1996 ("Commencement Date") and expiring on May 31, 2005, unless
terminated sooner as provided in this Lease and as may be extended as set
forth in Section 22 below. The time period during which this Lease shall
actually be in effect is referred to herein as the "Lease Term."
4. Rental and Other Payments.
A. If the Commencement Date is a date other than the first day of the
month, Tenant shall pay Landlord on the Commencement Date the Base
Monthly Rental prorated on the basis of the ratio that the number of
days from the Commencement Date through the last day in the month
containing the Commencement Date bears to the number of days in such
month. Thereafter, on or before the first day of each succeeding
calendar month, Tenant shall pay Landlord in advance the Base Monthly
Rental.
B. For any partial Lease Year between the commencement of the Lease Term
and the beginning of the next Lease Year and the beginning of the last
Lease Year and the end of the Lease Term, calculation of the Base
Annual Rental shall be prorated on the basis of the ratio of the
number of days in such partial Lease Year to 365.
C. All sums of money required to be paid by Tenant under this Lease which
are not specifically referred to as rent ("Additional Rental") shall
be considered rent although not specifically designated as such.
Landlord shall have the same remedies for nonpayment of Additional
Rental as those provided herein for the nonpayment of Base Annual
Rental.
5. Taxes and Assessments.
A. Tenant shall pay, prior to the due date thereof, all taxes and
assessments assessed against or imposed upon the Premises that are due
and payable during the Lease Term.
B. All taxing authorities shall be instructed to send all tax and
assessment invoices to Landlord. After recording the information on
such invoices, Landlord shall forward such invoices to Tenant for
payment. Within 30 days after each tax and assessment payment is
required by this Section to be paid, Tenant shall provide Landlord
with evidence reasonably satisfactory to Landlord that such payment
was made in a timely fashion. Tenant may in good faith seek a refund,
rebate or abatement of any tax levied in connection with the Premises
for taxes payable during the Lease Term.
6. Utilities. Tenant shall contract, in its own name, for and pay when due all
charges for the connection and use of water, gas, electricity, telephone,
garbage collection, sewer use and other utility services supplied to the
Premises during the Lease term.
7. Insurance.
A. Throughout the Lease Term, Landlord shall maintain, or cause to be
maintained, at its own expense, (which may be included under a blanket
insurance policy if all the other terms hereof are satisfied), "all
risk" or "special cause of loss" property insurance against loss,
damage or destruction by fire and other casualty, including theft,
vandalism and malicious mischief, flood (if the Premises are in a
location designated by the Secretary of Housing and Urban Development
as a flood hazard area), boiler explosion (if there is any boiler upon
the Premises), sprinkler damage (if the Premises have a sprinkler
system), insuring the Premises and all improvements thereon for not
less than 100% of their full insurable replacement cost.
B. Throughout the Lease Term, Tenant shall maintain, or cause to be
maintained, at its own expense, (which may be included under a blanket
insurance policy if all the other terms hereof are satisfied),
comprehensive general liability and property damage insurance,
including a products liability clause, covering Landlord and Tenant
against bodily injury liability, property damage liability and
automobile bodily injury and property damage liability, including
without limitation any liability arising out of the ownership,
maintenance, repair, condition or operation of the Premises or
adjoining ways, streets or sidewalks. Such insurance policy or
policies shall contain a broad form contractual liability endorsement
under which the insurer agrees to insure Tenant's obligations of
indemnity under this Lease to the extent insurable, and a
"severability of interest" clause or endorsement which precludes the
insurer from denying the claim of either Tenant or Landlord because of
the negligence or other acts of the other.
C. All insurance policies shall:
i. Provide for a waiver of subrogation by the insurer as to claims
against Landlord, its employees and agents;
ii. Provide that the policy of insurance shall not be terminated,
cancelled or substantially modified without at least 30 days'
prior written notice to Landlord and to any lender covered by any
standard mortgage clause endorsement;
iii. Be issued by insurance companies licensed to do business in the
state in which the Premises is located.
8. Payment of Rental and Other Sums. Any delinquent payment (that is, any
payment not made within five (5) calendar days after the date when due)
shall, in addition to any other remedy of Landlord, incur a late charge of
three percent (3%) of the payment amount (which late charge is intended to
compensate Landlord for the cost of handling and processing such delinquent
payment and should not be considered interest) and bear interest at the
rate of 12% per annum, which interest rate shall accrue from the date 10
days after such payment was due, but in no event shall Tenant be obligated
to pay a sum of late charge and interest higher than the maximum legal rate
then in effect ("Default Rate").
9. Use.
A. Tenant shall use the Premises for office/warehouse purposes.
B. Tenant shall not, by itself or through any assignment, sublease or
other type of transfer, convert the Premises to an alternative use
during the Lease Term without Landlord's consent, which consent shall
not be unreasonably withheld.
10. Compliance with Laws, Restrictions, Covenants and Encumbrances.
A. Tenant's use and occupation of the Premises, and the condition
thereof, shall, at Tenant's sole cost and expense, comply fully with
all applicable statutes, regulations, rules, ordinances, codes,
licenses and permits relating to Tenant's specific use of the
Premises.
B. Tenant will not permit any act or condition to exist on or about the
Premises which will increase any insurance rate thereon, except when
such acts are required in the normal course of its business and Tenant
shall pay for such increase.
11. Condition of Premises; Maintenance. Tenant has inspected, or had the
opportunity to inspect, the Premises and hereby accepts the Premises in the
condition existing as of the Commencement Date, subject to latent defects.
The improvements now or hereafter located on the Premises shall be kept in
the condition existing as of the Commencement Date, subject to reasonable
wear and tear and casualty damage.
12. Alterations.
A. Tenant shall not commit actual or constructive waste upon the
Premises. Tenant shall not alter the exterior, structural, plumbing or
electrical elements of the improvements now or hereafter located on
the Premises in any manner without the consent of Landlord, which
consent shall not be unreasonably withheld, delayed or conditioned;
provided, however, Tenant may undertake nonstructural alterations to
the Premises costing less than $15,000.00 without Landlord's consent.
B. Any addition to or alteration of the Premises shall be the property of
Tenant; provided that such addition to or alteration of the Premises
shall remain on the Premises and become the property of Landlord upon
the expiration or earlier termination of the Lease Term.
13. Indemnification. Except for the negligence or willful misconduct of
Landlord, Tenant shall indemnify, protect, defend and hold harmless
Landlord and Landlord's directors, officers, agents, lenders, attorneys and
employees from and against any and all claims, demands, causes of action,
suits, proceedings, liabilities, damages, losses, costs and expenses,
including Landlord's reasonable attorneys fees, caused by, incurred or
resulting from its operations in the Premises or from any breach of,
default under or failure to perform any term or provision of this agreement
by Tenant, its officers, employees, agents or other persons.
14. Quiet Enjoyment. So long as Tenant shall pay the rental and other sums
herein provided and shall keep and perform all of the terms, covenants and
conditions on its part herein contained, Tenant shall have, subject and
subordinate to Landlord's rights herein, the right to the peaceful and
quiet occupancy of the Premises as against all persons claiming by, through
or under Landlord.
15. Condemnation or Damage.
A. In case of taking of all or any part of the Premises or the
commencement of any proceedings or negotiations which might result in
a taking for any public or quasi-public purpose by any lawful power or
authority by exercise of the right of condemnation or eminent domain
or by agreement between Landlord, Tenant and those authorized to
exercise such right ("Taking"), Tenant will promptly give written
notice thereof to Landlord, generally describing the nature and extent
of such taking and including copies of any documents or notices
received in connection therewith.
B. In case of a Taking of the whole of the Premises, other than for
temporary use ("Total Taking"), this Lease shall terminate as of the
date of such Total Taking and all rentals, sums of money and other
charges provided to be paid by Tenant shall be apportioned and paid to
the date of such Total Taking. A Total Taking shall include a taking
of a portion of the Premises if, in the reasonable determination of
Landlord, the reminder of the Premises is not useable and cannot be
made useable for the purposes provided herein. Landlord shall be
entitled to receive the entire award or payment in connection with any
taking of the Premises without deduction for any estate vested in
Tenant by this Lease. Tenant hereby expressly assigns to Landlord all
of its right, title and interest in and to every such award or
payment. Tenant shall be entitled to claim and receive any award or
payment from the condemning authority expressly granted for the taking
of Tenant's trade fixtures and personal property, the interruption of
its business, moving expenses and any other award granted separately
to Tenant.
C. In the event of a Taking of less than all of the Premises, and such
Taking is not reasonably determined by Landlord to be a Total Taking
("Partial Taking") or of damage or destruction to all or any part of
the Premises, all awards, insurance proceeds, compensation or damages
shall be paid to Landlord, and Landlord shall have the option to (i)
terminate this Lease by notifying Tenant within 60 days after Tenant
gives Landlord notice of such damage or destruction or that title has
vested in the taking authority or (ii) continue this Lease in effect,
which election shall be evidenced by a notice from Landlord to Tenant
within such 60-day period. Tenant shall have a period of 60 days after
Landlord's notice that it has elected to terminate this Lease during
which to elect to continue this Lease on the terms herein provided. If
Tenant does not elect to continue this Lease or shall fail during such
60-day period to notify Landlord of Tenant's intent to continue this
Lease, then this Lease shall terminate as of the last day of the month
during which such 60-day period expired. Tenant shall then immediately
vacate and surrender the Premises, all obligations of either party
hereunder shall cease as of the date of termination. If Landlord
elects not to terminate this Lease, or if Landlord elects to terminate
this Lease but Tenant elects to continue this Lease, then this Lease
shall continue in full force and effect on the following terms: (i)
all Base Annual Rental, Additional Rental and other sums and
obligations due under this Lease shall proportionately abate until the
Premises are restored; and (ii) Landlord shall promptly commence and
diligently prosecute restoration of the Premises (but not including
any additions or alterations made by Tenant) to substantially the same
condition, as nearly as practicable, as prior to such partial
condemnation, damage or destruction.
D. Notwithstanding the foregoing, in the event of a Partial Taking or
damage or destruction to all or any part of the Premises, Tenant shall
have the right to terminate this Lease if the Premises cannot
reasonably be restored to a condition reasonably necessary for the
continuation of Tenant's business in the Premises within 60 days after
the date possession shall be taken pursuant to such Partial Taking or
the date of such damage or destruction of the Premises. Tenant shall
exercise such termination right in writing to Landlord within 60 days
after the date of such damage or destruction or the date title has
vested in the taking authority and the term of this Lease shall
automatically expire as of the date such damage to or destruction of
the Premises or the date possession shall be taken pursuant to such
Partial Taking.
16. Inspection. Landlord and its authorized representatives shall have the
right, upon giving reasonable notice, to enter the Premises or any part
thereof and inspect the same and make photographic or other evidence
concerning Tenant's compliance with the terms of this Lease. Landlord shall
exercise such rights in a manner that does not interfere with the conduct
of Tenant's business operations.
17. Right of First Refusal. If Landlord receives a bona fide offer to purchase
the Premises, which offer Landlord shall be ready and willing to accept,
then Tenant shall have the right to purchase the Premises at the same price
and upon the same terms and conditions as shall be offered by the
prospective buyer. Landlord shall provide Tenant with written notice of the
purchase price and all material terms and conditions of such offer by such
prospective buyer. Tenant shall have a period of 10 business days after
receipt of such notice from Seller in which to elect to purchase the
Premises at the same purchase price and on the same terms and conditions as
offered by such prospective buyer. Tenant must exercise such right by
delivering to Landlord written notice of such election within the 10
business day period. If Tenant fails to provide such notice within the 10
business day period, then Landlord shall have the right to sell the
Premises to a third party; provided, however, that if Landlord fails to
execute a purchase agreement with a third party for the Premises within 90
days after first providing Tenant with the bona fide offer to sell the
Premises, then Landlord shall again be obligated to comply with the terms
of this provision prior to selling the Premises to a third party. Tenant's
rights under this Lease, except for the right of first refusal described in
this Section 17, will remain in full force and effect if the Premises are
sold to a third party.
18. Default, Remedies and Measure of Damages.
A. Each of the following shall be deemed a material breach of this Lease
and a default by Tenant:
i. If any rent or other monetary sum due hereunder is not paid
within ten (10) days of written notice from Landlord to Tenant;
or
ii. If Tenant becomes insolvent within the meaning of the United
States Bankruptcy Code, 11 U.S.C. Sec. 101 et seq., as amended
(the "Code"), files or notifies Landlord that it intends to file
a petition under the Code, initiates a proceeding under any
similar law or statute relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts (collectively,
hereinafter, an "Action"), becomes the subject of either a
petition under the Code or an Action; or
iii. If Tenant fails to observe or perform any of the covenants,
conditions, or obligations of this Lease and such failure is not
cured within thirty (30) days of written notice from Landlord to
Tenant or if such failure cannot reasonably be cured within such
30-day period, as determined by Landlord in its reasonable
discretion, and Tenant is diligently pursuing a cure of such
breach or default, then Tenant shall have a reasonable period to
cure such breach or default.
B. As a material inducement to Landlord executing this Lease, in the
event of any breach or default, and with or without any notice or
demand, except the notice prior to default required under certain
circumstances by the provisions of this Section or such other notice
as may be required by statute and cannot be waived by Tenant (all
other notices being hereby waived), Landlord shall be entitled to
exercise, at its option, concurrently, successively, or in any
combination, all remedies available at law or in equity, including
without limitation any one or more of the following:
i. To terminate this Lease, whereupon Tenant's right to possession
of the Premises shall cease and this Lease, except as to Tenant's
liability, shall be terminated;
ii. To reenter and take possession of the Premises and to expel
Tenant and those claiming under or through Tenant, without being
deemed guilty in any manner of trespass or becoming liable for
any loss or damage resulting therefrom, without resort to legal
or judicial process, procedure or action. No notice from Landlord
hereunder or under a forcible entry and detainer statute or
similar law shall constitute an election by Landlord to terminate
this Lease unless such notice specifically so states. If Tenant
shall, after default, voluntarily give up possession of the
Premises to Landlord, deliver to Landlord or its agents the keys
to the Premises, or both, such actions shall be deemed to be in
compliance with Landlord's rights and the acceptance thereof by
Landlord or its agents shall not be deemed to constitute a
termination of this Lease. Landlord reserves the right following
any reentry and/or reletting to exercise its right to terminate
this Lease by giving Tenant written notice thereof, in which
event this Lease will terminate as specified in said notice;
iii. To bring an action against Tenant for any damages sustained by
Landlord or any equitable relief available to Landlord;
iv. To relet the Premises or any part thereof for such term or terms
(including a term which extends beyond the original term of this
Lease), at such rentals and upon such other terms as Landlord, in
its reasonable discretion, may determine, with all proceeds
received from such reletting being applied to the rental and
other sums due from Tenant in such order as Landlord, may, in its
reasonable discretion, determine, which other sums include all
repossession costs, brokerage commissions, attorneys' fees and
expenses, employee expenses, and repair costs. Landlord shall use
reasonable efforts to relet the Premises for the account of
Tenant.
v. To accelerate and recover from Tenant the present value of the
excess of all rent and other monetary sums due and owing and
scheduled to become due and owing under the Lease both before and
after the date of such breach over the fair market rental value
of the Premises, for the balance of the Lease Term;
vi. To immediately or at any time thereafter, and with or without
notice, except as required herein, set off any money of Tenant
held by Landlord under this Lease against any sum owing by Tenant
hereunder; and/or
vii. To enforce, and Tenant does hereby consent to such enforcement,
notwithstanding any laws to the contrary, all of Landlord's
self-help remedies available at law or in equity without Landlord
resorting to any legal or judicial process, procedure or action.
19. Subordination, Nondisturbance and Attornment.
A. Landlord's interest in this Lease and/or the Premises shall not be
subordinate to any encumbrances placed upon the Premises by or
resulting from any act of Tenant, and nothing herein contained shall
be construed to require such subordination by Landlord. Tenant shall
keep the Premises free from any liens for work performed, materials
furnished or obligations incurred by Tenant; provided, however, that
Tenant shall have the right to contest any such liens upon delivery of
reasonable security to Landlord.
B. Unless Landlord elects otherwise, this Lease at all times shall
automatically be subordinate to the lien of any and all ground leases,
mortgages and trust deeds now or hereafter placed upon the Premises by
Landlord, and Tenant covenants and agrees to execute and deliver, upon
demand, such further instruments subordinating this Lease to the lien
of any or all such ground leases, mortgages or trust deeds as shall be
desired by Landlord, or any present or proposed mortgagees or trustees
under trust deeds, upon the condition that Tenant shall have the right
to remain in possession of the Premises under the terms of this Lease,
and shall have all other rights granted to Tenant under this Lease,
notwithstanding any default in any or all such mortgages or trust
deeds, or after foreclosure thereof, so long as Tenant is not in
default under any of the covenants, conditions and agreements
contained in this Lease.
C. If any mortgagee or trustee elects to have this Lease and the interest
of Tenant hereunder be superior to any such interest or right and
evidences such election by notice given to Tenant, then this Lease and
the interest of Tenant hereunder shall be deemed superior to any such
mortgage or trust deed, whether this Lease was executed before or
after such mortgage or trust deed and in that event such mortgagee or
trustee shall have the same rights with respect to this Lease as if it
had been executed and delivered prior to the execution and delivery of
the mortgage or trust deed and has been assigned to such mortgagee or
trustee.
20. Estoppel Certificate. At any time, and from time to time, Tenant agrees,
promptly and in no event later than 10 days after a request from Landlord,
to execute, acknowledge and deliver to Landlord or any present or proposed
mortgagee or purchaser designated by Landlord a certificate in the form
supplied by Landlord, certifying: (i) that Tenant has accepted the Premises
(or, if Tenant has not done so, that Tenant has not accepted the Premises,
and specifying the reasons therefor); (ii) that this Lease is in full force
and effect and has not been modified (or if modified, setting forth all
modifications), or, if this Lease is not in full force and effect, the
certificate shall specify the reasons therefor; (iii) the commencement and
expiration dates of the Lease Term and the terms of any extension options
of Tenant; (iv) the date to which the rentals have been paid under this
Lease and the amount thereof then payable; (v) whether there are then any
existing defaults by Landlord in the performance of its obligations under
this Lease, and, if there are any such defaults, specifying the nature and
extent thereof; (vi) that no notice has been received by Tenant of any
default under this Lease which has not been cured, except as to defaults
specified in the certificate; and (vii) the capacity of the person
executing such certificate, and that such person is duly authorized to
execute the same on behalf of Tenant.
21. Assignment.
A. Landlord shall have the right to sell or convey the Premises subject
to this Lease or to assign its right, title and interest as Landlord
under this Lease in whole or in part. In the event of any such sale or
assignment other than a security assignment, Tenant shall attorn to
such purchaser or assignee and, provided that the such purchaser or
assignee shall assume Landlord's obligations hereunder, Landlord shall
be relieved, from and after the date of such transfer or conveyance,
of liability for the performance of any obligation of Landlord
contained herein, except for obligations or liabilities accrued prior
to such assignment or sale.
B. Tenant shall not, without the consent of Landlord, which consent shall
not be unreasonably withheld, (i) assign, transfer, convey, pledge,
mortgage or grant a deed of trust on this Lease or any interest
therein, whether by operation of law or otherwise, except as expressly
provided by other provisions of this Lease; or (ii) sublet all or any
part of the Premises. No such assignment or subletting shall relieve
Tenant of its obligations respecting this Lease. Any purported
transfer, conveyance, pledge, mortgage or deed of trust in violation
of this paragraph shall be voidable at the sole option of Landlord.
C. Notwithstanding the foregoing, Tenant shall have the right, with
notice to Landlord but without obtaining Landlord's consent, to assign
or sublet the Premises or any portion thereof to any entity controlled
by, controlling or under common control with Tenant, or to any entity
that acquires all or substantially all of Tenant's assets or stock.
22. Option To Extend.
A. Tenant, provided it is not in default hereunder at the time of
exercise or at the expiration of the Lease Term, shall have the option
to continue this Lease in effect for one (1) additional period of 5
years in accordance with its original terms and provisions, except
that the Base Annual Rent shall equal the annual fair market rental
value of the Premises (to be determined as set forth below).
B. Tenant shall exercise such extension option by giving notice to
Landlord of Tenant's intention to do so not more than 270 days or less
than 150 days prior to the expiration of the Lease Term. The parties
shall negotiate in good faith to determine the annual fair market
rental value of the Premises. If the parties are unable to agree on
the annual fair market rental value of the Premises within 30 days
after Landlord's receipt of Tenant's notice to extend, then Landlord
shall cause an appraisal of the fair market rental value of the
Premises to be made by an independent MAI appraiser. If within 20 days
after being notified of the result of such appraisal Tenant elects to
reject that appraisal, then Landlord shall nominate to Tenant a list
of not less than 3 independent MAI appraisers who are experienced with
appraising property similar to the Premises, and Tenant shall select
one such appraiser. All appraisal fees shall be divided equally
between the parties. Within 60 days of such selection, an appraisal
shall be made of the Premises by that appraiser and within 20 days
after the results of that appraisal shall have been delivered to
Tenant, Tenant shall notify Landlord of Tenant's election to exercise
its option to extend this Lease and shall pay the rental so
established above. If such notice of exercise is not received by
Landlord within the 20-day period, then this Lease shall terminate on
the last day of the Lease Term.
23. Notices. All notices, consents, approvals or other instruments required or
permitted to be given by either party pursuant to this Lease shall be in
writing and given by (A) hand delivery, (B) facsimile, (C) express
overnight delivery service or (D) certified or registered mail, return
receipt requested, and shall be deemed to have been delivered upon (A)
receipt, if hand delivered, (B) transmission, if delivered by facsimile,
(C) the next business day, if delivered by express overnight delivery
service, or (D) the third business day following the day of deposit of such
notice with the United States Postal Service, if sent by certified or
registered mail, return receipt requested. Notices shall be provided to the
parties at the addresses (or facsimile numbers, as applicable) specified
below:
A. If to Tenant: Garment Graphics, Inc.
2260 Woodale Drive
Mounds View, MN
Attn: President
Telephone: (612) 783-6749
Facsimile: (612) 786-5775
B. If to Landlord R. Neil Hamlin
2065 Long Lake Road
New Brighton, MN 55112-5166
Telephone: (612) 631-0980
Facsimile: (612) 631-0980
or to such other address or such other person as either party may from time
to time hereafter specify to the other party in a notice delivered in the
manner provided above.
24. Holding Over. If Tenant remains in possession of the Premises after the
expiration of the term hereof, Tenant, at Landlord's option and within
Landlord's sole discretion, may be deemed a tenant on a month-to-month
basis and shall continue to pay rentals and other sums in the amounts
herein provided, except that the Base Monthly Rental shall be automatically
125% of the Base Monthly Rental, and to comply with all the terms of this
Lease; provided that nothing herein nor the acceptance of rent by Landlord
shall be deemed a consent to such holding over.
25. Removal of Tenant's Property. At the expiration of the Lease Term, Tenant
may remove from the Premises all personal property, tenant fixtures and
equipment belonging to Tenant (but not including any improvements, which
shall become the property of the Landlord at the expiration of the Lease
Term and shall be surrendered by Tenant to Landlord.) Tenant shall repair
any damage caused by such removal and shall leave the Premises broom clean
and in good and working condition and repair inside and out, except for
reasonable wear and tear and casualty damage. Any property of Tenant left
on the Premises on the tenth day following the expiration of the Lease Term
shall automatically and immediately become the property of Landlord,
without relieving Tenant of its obligation hereunder to remove the same at
the option of Landlord.
26. Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts,
act of God, enemy or hostile governmental action, civil commotion, fire or
other casualty beyond the control of the party obligated to perform shall
excuse the performance by such party for a period equal to any such
prevention, delay or stoppage, except the obligations imposed with regard
to rental and other monies to be paid by Tenant pursuant to this Lease.
27. Time Is of the Essence. Time is of the essence with respect to each and
every provision of this Lease in which time is a factor.
28. Waiver and Amendment. No provision of this Lease shall be deemed waived or
amended except by a written instrument unambiguously setting forth the
matter waived or amended and signed by the party against which enforcement
of such waiver or amendment is sought. Waiver of any matter shall not be
deemed a waiver of the same or any other matter on any future occasion. No
acceptance by Landlord of an amount less than the monthly rent and other
payments stipulated to be due under this Lease shall be deemed to be other
than a payment on account of the earliest such rent or other payments then
due or in arrears nor shall any endorsement or statement on any check or
letter accompanying any such payment be deemed a waiver of Landlord's right
to collect any unpaid amounts or an accord and satisfaction.
29. Successors Bound. Except as otherwise specifically provided herein, the
terms, covenants and conditions contained in this Lease shall bind and
inure to the benefit of the respective heirs, successors, executors,
administrators and assigns of each of the parties hereto.
30. No Merger. The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not result in a merger of Landlord's and
Tenant's estates, and shall, at the option of Landlord, either terminate
any or all existing subleases or subtenancies, or operate as an assignment
to Landlord of any or all of such subleases or subtenancies.
31. Captions. Captions are used throughout this Lease for convenience or
reference only and shall not be considered in any manner in the
construction or interpretation hereof.
32. Severability. The provisions of this Lease shall be deemed severable. If
any part of this Lease shall be held unenforceable by any court of
competent jurisdiction, the remainder shall remain in full force and
effect, and such unenforceable provision shall be reformed by such court so
as to give maximum legal effect to the intention of the parties as
expressed therein.
33. Arbitration. All claims, disputes and other matters or questions arising
out of or relating to this Lease will be decided by arbitration in
accordance with the commercial Arbitration Rules of the American
Arbitration Association. The arbitrator will be an attorney or retired
judge with substantial experience in real estate matters. The arbitrator
shall provide for pre-hearing discovery by the parties. This Agreement to
arbitrate will be specifically enforceable under the prevailing arbitration
law. The award rendered by the arbitrator will be final and judgment may be
entered upon it in accordance with applicable law in any court having
jurisdiction thereof.
34. Attorneys' Fees. In the event of any arbitration proceeding between the
parties concerning this Lease, to the extent permitted by law, the
prevailing party shall be entitled to recover all of its reasonable
attorneys' fees and other costs in addition to any other relief to which it
may be entitled.
35. Entire Agreement. This Lease, and any other instruments or agreements
referred to herein, constitute the entire agreement between the parties
with respect to the subject matter hereof, and there are no other
representations, warranties or agreements except as herein provided.
Without limiting the foregoing, Tenant specifically acknowledges that
neither Landlord nor any agent, officer, employee or representative of
Landlord has made any representation or warranty regarding the projected
profitability of the business to be conducted on the Premises. Furthermore,
Tenant acknowledges that Landlord did not prepare or assist in the
preparation of any of the projected figures used by Tenant in analyzing the
economic viability and feasibility of the business to be conducted by
Tenant at the Premises.
36. Counterparts. This Lease may be executed in one or more counterparts, each
of which shall be deemed an original.
37. No Brokerage. Landlord and Tenant represent and warrant to each other that
they have had no conversation or negotiations with any broker concerning
the leasing of the Premises. Each of Landlord and Tenant agrees to protect,
indemnify, save and keep harmless the other, against and from all
liabilities, claims, losses, costs, damages and expenses, including
attorneys' fees, arising out of, resulting from or in connection with their
breach of the foregoing warranty and representation.
Landlord and Tenant have caused this Lease to be executed and delivered
effective as of the date first above written.
/s/ R. Neil Hamlin
R. NEIL HAMLIN
GARMENT GRAPHICS, INC.
By /s/ Barbara S. Remley
Its President
EXHIBIT A
Legal Description
All that part of the Southeast Quarter (SE 1/4) of Section Twenty-Six (26),
Township Thirty-One (31), Range Twenty-Four (24), Anoka County, Minnesota, lying
Southwesterly of the Southwesterly right-of-way line of the Burlington Northern
Railway; also lying Northeasterly of County-State Aid Highway No. 1, also known
as the East River Road, formerly known as the "United States Military Road" or
"Old Military Road"; also lying Southeasterly of the following described line:
Commencing at the intersection of the North line of said Southeast Quarter of
Section 26 with the Southwesterly right-of-way line of the Burlington Northern
Railway, said right-of-way line for purposes of this line description only being
a line 65 feet Southwesterly from, and parallel to, the centerline of the
Easterly of two sets of railroad tracks existing as of January 1986; thence
Southeasterly along said right-of-way line a distance of 1383.26 feet to the
point of beginning of the line to be described; thence deflecting to the right
at an angle of 93 degrees 45 minutes 12 seconds a distance of 591.53 feet South
74 degrees 33 minutes 45 seconds West to a point of curvature; thence along a
curve to the left, concave Southeasterly and having a radius of 150.00 feet and
a central angle of 45 degrees 00 minutes 00 seconds, an arc distance of 117.81
feet; thence tangent to last described curve South 29 degrees 33 minutes 45
seconds West, a distance of 50.29 feet to a point of curvature; thence along a
curve to the right, concave Northwesterly and having a radius of 70.00 feet and
a central angle of 45 degrees 00 minutes 00 seconds, an arc distance of 54.98
feet; thence tangent to last described curve South 74 degrees 33 minutes 45
seconds West, a distance of 21.01 feet to above-mentioned County-State Aid
Highway No. 1, and there terminating;
also lying Northwesterly of Lots 1 through 4, inclusive, Block 1, Foley
Boulevard Addition; according to the plat thereof of record in said Anoka
County; also lying Northwesterly of the following described line:
Commencing at the most Northerly corner of Lot 4, said Block 1, Foley Boulevard
Addition; thence along the Northeasterly extension of the Northwesterly line of
Lots 3 and 4, said Block 1, and along the Northwesterly line of a parcel
conveyed to George Butts by deed recorded in Book 117, Page 580, said
Southwesterly right-of-way line of the Burlington Northern Railway and there
terminating;
being a portion of what is NOW KNOWN AS Lot 16, Auditor's Subdivision No. 57,
2nd Revision, Anoka County, Minnesota.
TOGETHER WITH a Driveway Easement created by Declaration of Reciprocal Driveway
Easements recorded in the office of the Anoka County Recorders Document No.
793075
Known at 9445 East River Road, Coon Rapids, Minnesota.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 895641
<NAME> GARMENT GRAPHICS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 260,318
<SECURITIES> 0
<RECEIVABLES> 1,161,743
<ALLOWANCES> 0
<INVENTORY> 6,551,440
<CURRENT-ASSETS> 9,556,700
<PP&E> 1,968,348
<DEPRECIATION> (1,231,871)
<TOTAL-ASSETS> 10,679,377
<CURRENT-LIABILITIES> 7,688,894
<BONDS> 0
0
0
<COMMON> 3,081
<OTHER-SE> 2,934,970
<TOTAL-LIABILITY-AND-EQUITY> 10,679,377
<SALES> 8,103,471
<TOTAL-REVENUES> 8,103,471
<CGS> 5,943,148
<TOTAL-COSTS> 7,720,524
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,043
<INCOME-PRETAX> 252,904
<INCOME-TAX> 87,237
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,666
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
