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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996 COMMISSION FILE NUMBER: 0-22012
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GROW BIZ INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter.)
MINNESOTA 41-1622691
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
4200 Dahlberg Drive, Minneapolis, MN 55422-4837
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (612) 520-8500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Registrant's Common Stock
on January 31, 1997, as reported on the NASDAQ National Market System, was $19.9
million.
Shares of no par value Common Stock outstanding as of January 31, 1997:
6,257,044 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Registrant's Annual Meeting
of Shareholders to be held on April 30, 1997 have been incorporated by reference
into Part III of this report.
ITEM 1: BUSINESS
GENERAL
Grow Biz International, Inc., (the Company) is a franchise company that
franchises five retail concepts which buy, sell, trade and consign merchandise.
Each concept operates in a different industry and provides the consumer with
'ultra-high value' retailing. The Company began franchising the Play It Again
Sports store concept in 1988 and, through a series of acquisitions, has expanded
its operations.
* In January 1992, the Company purchased certain assets and the
operations of Sports Traders, Inc., a wholesaler to Play It
Again Sports retail stores, for aggregate consideration of
$1.9 million. Prior to this acquisition, Sports Traders, Inc.
operated as an independent wholesaler and priced its
merchandise at margins reflective of an independent
wholesaler. Subsequent to this acquisition, the Company
restructured the operations into a centralized buying group
with the goal of creating a cost-effective inventory
purchasing service to support the Company's franchise system.
The buying group negotiates favorable discount terms with
vendors and charges the franchisee a service fee, currently
set at 4%. The service fee on merchandise purchased through
the buying group is used to cover the cost of operating the
buying group.
* In March 1992, the Company purchased the assets and assumed
the obligations of three Play It Again Sports retail stores
for an aggregate purchase price of $908,000.
* In November 1992, the Company purchased from Once Upon A
Child, Inc. its franchising and royalty rights for an
aggregate purchase price of $325,000. There were 22 retail
stores in operation at the time of purchase, 11 of which have
been exempted from paying royalty fees as part of the purchase
agreement. The Company began franchising this concept in 1993.
* In February 1993, the Company purchased certain assets of the
retail operations of 'Hi Tech Consignments', which formed the
basis of the Company's Music Go Round store concept, for an
aggregate purchase price of $500,000. The Company began
franchising this concept in 1994.
* In April 1993, the Company purchased the retail and warehouse
operations and the franchising and royalty rights of Computer
Renaissance, Inc. for an aggregate purchase price of $672,000.
The Company began franchising this concept in 1993.
* In July 1994, the Company acquired certain assets and the
franchising and royalty rights of CDX Audio Development, Inc.,
which formed the basis for the Company's Disc Go Round store
concept, for an aggregate purchase price of $2,358,000. At the
time of acquisition, there were 43 stores in operation under
the name 'CD Exchange'. The Company changed the name and began
franchising this concept in 1994.
Each of the Company's retail store concepts emphasize consumer value by offering
quality used merchandise at substantial savings from the price of new
merchandise and by purchasing customers' used goods that have been outgrown or
are no longer used. The stores also offer new merchandise to supplement their
selection of used goods.
The Company's five store concepts are summarized as follows:
PLAY IT AGAIN SPORTS(R)
Play It Again Sports(R) stores sell, buy, trade and consign used and new
sporting goods, equipment and accessories for a variety of athletic activities
including hockey, in-line skating, golf and tennis. The stores offer a flexible
mix of merchandise that is adjusted to adapt to seasonal and regional
differences. Sales of used sporting goods are emphasized to provide the highest
value to the customer. New merchandise is offered to supplement available used
goods.
ONCE UPON A CHILD(R)
Once Upon A Child(R) stores sell and buy used and new children's clothing, toys,
furniture and accessories. The Once Upon A Child(R) store concept primarily
targets cost-conscious parents of children ages infant to twelve years with
emphasis on children ages seven years and under. These customers have the
opportunity to sell their used children's items to a Once Upon A Child(R) store
when outgrown and to purchase quality used children's clothing, toys, furniture
and accessories at prices lower than new merchandise.
COMPUTER RENAISSANCE(R)
Computer Renaissance(R) stores sell, buy, trade, consign and service used and
new personal computers, printers and other computer equipment and related
accessories. Customers of Computer Renaissance(R) are primarily individuals in
the market for home computer equipment and small businesses. These same
customers have the opportunity to sell their used computer equipment back to a
Computer Renaissance(R) store when they are ready to upgrade their equipment.
MUSIC GO ROUND(R)
Music Go Round(R) stores sell, buy, trade and consign used and new musical
instruments, speakers, amplifiers, music-related electronics and related
accessories for parents of children who play musical instruments and
professional and amateur musicians.
DISC GO ROUND(R)
Disc Go Round(R) stores sell and buy both used and new compact discs and related
accessories. The concept primarily targets consumers who actively trade and
collect compact discs. Most stores carry a variety of titles that appeal to all
ages and musical tastes.
Following is a summary of the Company's franchising and corporate store activity
for the fiscal year ended December 28, 1996:
---------- ------------ ---------- ------------- ------------ ------------- -----------
STORES
TOTAL TOTAL AWARDED,
12/30/95 OPENED CLOSED CONVERTED 12/28/96 NOT OPEN TOTAL
---------- ------------ ---------- ------------- ------------ ------------- -----------
Play It Again Sports(R)
Franchised Stores - US and Canada 629 73 (26) 0 676 86 762
Franchised Stores - Other International 8 0 0 0 8 0 8
Corporate - Owned 4 0 0 0 4 0 4
Other 21 1 0 0 22 0 22
Once Upon A Child(R)
Franchised Stores - US and Canada 150 35 (3) 0 182 55 237
Corporate - Owned 7 0 0 (1) 6 0 6
Computer Renaissance(R)
Franchised Stores - US and Canada 39 68 0 1 108 82 190
Corporate - Owned 5 0 0 (1) 4 0 4
Music Go Round(R)
Franchised Stores - US and Canada 5 15 0 0 20 13 33
Corporate - Owned 3 0 0 1 4 0 4
Disc Go Round(R)
Franchised Stores - US and Canada 92 32 (10) 0 114 54 168
Corporate - Owned 2 0 0 0 2 0 2
----- ----- ----- ----- ----- ----- -----
Total 965 224 (39) 0 1,150 290 1,440
===== ===== ===== ===== ===== ===== =====
FRANCHISING OVERVIEW
Franchising is a method of distributing goods and services. The franchisor
typically develops a business concept and an operating system for the franchised
business. Franchisees are granted rights to use the franchisor's service marks
and must operate their businesses in accordance with the systems,
specifications, standards and formats developed by the franchisor. Virtually all
types of retail businesses are currently franchised, including clothing,
computers and electronics, sporting goods and various specialty retail
businesses.
BUSINESS STRATEGY
The Company's business strategy is to develop value-oriented retail concepts
based on a mix of used and new merchandise and to implement these concepts
through a nationwide franchise system that provides comprehensive support
services to its franchisees. The key elements of this strategy include:
VALUE-ORIENTED MERCHANDISING
The Company's retail concepts provide value to consumers by purchasing and
reselling used merchandise that consumers have outgrown or no longer use at
substantial savings from the price of new merchandise. By offering a combination
of high quality used and value-priced new merchandise, the Company benefits from
consumer demand for value-oriented retailing. In addition, the Company believes
that among national retail operations its retail store concepts provide a unique
source of value to consumers by purchasing used merchandise. The Company also
believes that the strategy of buying used merchandise increases consumer
awareness of the Company's retail concepts.
FRANCHISE SUPPORT
The Company recognizes that its success depends on the economic success of its
franchisees. Accordingly, the Company provides a comprehensive package of
support services and assistance to franchisees, including advertising and
marketing programs, point-of-sale computerized information systems, management
training, store opening assistance and periodic field support visits. A central
element of this support system is television advertising designed to build
consumer awareness of the Company's used product concepts.
ACTIVE OWNER INVOLVEMENT
In the Company's experience, its retail concepts are most successful when the
owner of the franchise is integrally involved in the management of a store. As a
result, the Company generally grants franchises to someone who will directly
operate their store.
FRANCHISE OPERATIONS
As a franchisor, the Company's success depends upon its ability to develop and
support competitive and successful franchise concepts. The Company emphasizes
the following areas of franchise support and assistance:
TRAINING
Each franchisee must attend the Company's training program regardless of prior
experience. The training program is a two-part program. Soon after signing a
franchise agreement, the franchisee is required to attend a new owner
orientation training. This course covers basic management issues, such as
preparing a business plan, evaluating insurance needs and obtaining financing.
The Company's training staff assists each franchise in developing a business
plan for their store with financial and cash flow projections. The second
training session is centered on store operations. It covers, among other things,
point of sale computer training, inventory selection and acquisition, sales,
marketing and other topics selected by the Company. The franchisee is provided
with an operations manual that is updated periodically by the Company. The
Company provides, at a minimum, one operations person to assist the franchisee
on the day before and the day of opening of the franchisee's store and has a
field support program designed to assist franchisees in operating their stores.
PURCHASING
During training, each franchisee is taught how to evaluate, purchase and price
used goods. In addition to purchasing used products from customers who bring
used merchandise to the store, the franchisee is also encouraged to develop
sources for purchasing used merchandise in the community. Play It Again
Sports(R), Once Upon A Child(R), Music Go Round(R) and Disc Go Round(R)
franchisees typically do not repair or recondition used products, but rather,
purchase quality used merchandise that may be put directly on display for resale
on an 'AS IS' basis. Computer Renaissance(R) franchisees offer repair and
technical services. The Company has developed specialized computer point-of-sale
systems for Once Upon A Child(R) stores that provide the franchisee with
standardized pricing information to assist in the purchasing of used items.
Through 1996, the Company provided centralized buying for new products to the
Play It Again Sports(R), Once Upon A Child(R), Music Go Round(R) and Disc Go
Round(R) stores. The Company will continue to provide centralized buying
services including credit and billing for the Play It Again Sports(R)
franchisees. Upon credit approval, the Play It Again Sports(R) franchisees may
order through the buying group, in which case, product is drop-shipped directly
to the store by the vendor. The Company is then invoiced by the vendor and, in
turn, the Company invoices the franchisee adding a 4% service fee.
Through 1996, Play It Again Sports(R), Once Upon A Child(R) and Computer
Renaissance(R) franchisees had the option to purchase close-out and discontinued
inventory through the Company's warehouse operation. This warehouse operation
was phased out late in 1996. To provide each concept's franchisees a source of
affordable new product, the Company has developed relationships with its core
vendors and negotiated prices for our franchisees to take advantage of on a
direct basis.
RETAIL ADVERTISING AND MARKETING
The Company requires its franchisees to implement a marketing program that uses
television as a major, but not sole, medium to advertise both the buying and
selling aspects of the Company's retail concepts. Advertising materials,
in-store posters and pre-recorded 10, 15 and 30-second television commercials
are provided by the Company to franchisees. Each Play It Again Sports(R), Once
Upon A Child(R) and Disc Go Round(R) franchisee is required to spend at least 5%
of its gross sales on approved advertising and marketing. Computer
Renaissance(R) and Music Go Round(R) franchisees are required to spend at least
3% of gross sales on approved advertising and marketing. In addition to these
required advertising expenditures, all franchisees are required to pay the
Company an annual advertising production fee of $500. Franchisees are required
to participate in regional cooperative advertising groups as designated by the
Company.
COMPUTERIZED POINT-OF-SALE SYSTEMS
The Company requires franchisees to use a retail information management computer
system in each store. Stores which were opened prior to April 1992 were not
required to install the system. This computerized point-of-sale system is
designed specifically for use in the retail stores franchised by the Company.
This system includes a cash register, bar code printer and scanner, together
with software modules for inventory management, cash management and customer
information management. The system is designed to accommodate buying and
consigning of used merchandise. The Company believes that this system provides
franchisees with an important management tool that reduces errors, increases
efficiencies and enhances inventory control. The Company provides the software,
while the hardware is provided by a third-party vendor located on the Company's
premises.
OTHER SUPPORT SERVICES
The Company assists each new franchisee in site location. A third party vendor
provides design layouts and opening materials including pricing materials,
stationery, signage, fixtures, slatwall and carpeting.
Personnel from the Company visit each store periodically, and, in most cases, a
business appraisal is made to determine whether the franchisee is operating in
accordance with the Company's standards. Additional communication with
franchisees is made through weekly news updates, broadcast faxes and semi-annual
conferences, which include trade shows.
FRANCHISE MARKETING
The Company has a franchise marketing program which seeks to attract prospective
franchisees with experience in management and operations and an interest in
being the owner and operator of their own business. The Company seeks
franchisees who are college educated, who have a net worth of at least $300,000
and who have prior business experience.
DEVELOPMENT / FUTURE EXPANSION
The Company collects franchise fees when franchise agreements are consummated
and recognizes the franchise fees as revenue when substantially all initial
franchise services have been performed. Deferred franchise fee revenue was
$4,143,000 and $4,269,000 representing fees relating to 346 and 290 stores sold
but not open at December 30, 1995 and December 28, 1996, respectively. The
majority of this backlog represents stores to be opened in the future under
multiple store development agreements.
THE FRANCHISE AGREEMENT
The following summaries of certain provisions of the Company's current standard
franchise agreement do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
franchise agreement. A copy of the current agreement has been filed as an
exhibit to this Form 10-K. Except as noted, the franchise agreements used for
each of the Company's business concepts are the same.
Each franchisee must execute the Company's franchise agreement and pay an
initial franchise fee. At December 28, 1996, the franchise fee for Play It Again
Sports(R) and Computer Renaissance(R) was $25,000 for an initial store and
$20,000 for each subsequent store awarded to the same franchisee within the same
concept. At December 28, 1996, the franchise fee for Once Upon A Child(R), Music
Go Round(R) and Disc Go Round(R) was $20,000 for an initial store and $15,000
for each subsequent store awarded to the same franchisee within the same
concept. Typically, the franchisee's initial store is open for business within
150 to 210 days from the date the franchise agreement is signed. Multiple
franchise holders are generally required to open only one store per year. The
franchise agreement has an initial term of 10 years, with subsequent 10-year
renewal periods, and grants the franchisee an exclusive geographic area which
will vary in size depending upon population and demographics. A renewal fee
equal to the lesser of $5,000 or 25% of the then current initial franchise fee
is payable to the Company 30 days prior to any franchise renewal. Under current
franchise agreements, Play It Again Sports(R), Once Upon A Child(R) and Disc Go
Round(R) franchisees are required to pay the Company weekly royalties equal to
5% of gross sales; Play It Again Sports(R) franchise agreements signed prior to
April 1, 1992 require payment of a 3% royalty. The weekly royalties for Computer
Renaissance(R) and Music Go Round(R) franchisees are equal to 3% of gross sales.
Each franchisee is required to pay the Company an annual advertising production
fee of $500. Each Play It Again Sports(R), Once Upon A Child(R) and Disc Go
Round(R) franchisee is required to spend 5% of its gross sales for advertising
and promoting its franchised store. The Company has the option to increase the
minimum advertising expenditure requirement for these franchises to 6% of the
franchisee's gross sales, of which up to one-third, or 2%, would be paid to the
Company as an advertising fee for deposit in an advertising fund. This fund
would be managed by the Company and would be used for advertising and promotion
of the franchise system. The Company expects to initiate this advertising fund
when it determines that the respective franchise system warrants such an
advertising and promotion program. Computer Renaissance(R) and Music Go Round(R)
franchisees are required to spend at least 3% of gross sales for approved
advertising. The Company has the option to increase the minimum advertising
expenditure requirement for these franchises to 4% of the franchisee's gross
sales, of which up to one-third, or 1 1/2%, would be paid to the Company as an
advertising fee for deposit into an advertising fund.
Although the Company's franchise agreements contain provisions designed to
assure the quality of a franchisee's operations, the Company has less control
over a franchisee's operations than it would if it owned and operated the store.
Under the franchise agreement, the Company has a right of first refusal on the
sale of any franchised store, but is not obligated to repurchase any franchise.
INTERNATIONAL FRANCHISE EXPANSION
The Company began franchising the Play It Again Sports(R) concept
internationally in 1991 and as of December 28, 1996, had 64 franchised stores
open in Canada, eight in Germany and one in Australia. The Canadian stores are
operated by franchisees under agreements substantially similar to those used for
franchisees in the United States. In Europe, the Company has established a joint
venture which acts as a master franchisor of the Play It Again Sports(R)
concept.
During 1995, the Company also entered into a Master Franchise Agreement for
development of the Play It Again Sports(R) concept in certain portions of
Australia. Under this Master Franchise Agreement, the Company has granted to a
master franchisee the right to subfranchise to others who will directly operate
Play It Again Sports(R) stores.
COMPETITION
Retailing, including the sale of sporting goods, children's apparel, computer
equipment, musical instruments and compact discs, is highly competitive. Many
retailers have substantially greater financial and other resources than the
Company. The Company's franchisees compete with established locally owned retail
stores, discount chains and traditional retail stores for sales of new
merchandise. Full line retailers generally carry little or no used merchandise
and do not target the same markets as the Company's franchised stores. Resale,
thrift and consignment shops and garage and rummage sales offer some competition
to the Company's franchisees for the sale of used merchandise. The Company is
aware of, and competes with, one franchisor of stores which sell new and used
sporting equipment, one franchisor of stores which sell used and new children's
clothing, toys and accessories and at least one franchisor of stores which sell
used and new compact discs.
The Company and its franchisees may face additional competition as its franchise
systems expand, and from additional competitors that may enter the used
merchandise market. The Company believes that its franchisees will continue to
be able to compete favorably with other retailers based on the strength of the
Company's value oriented concepts, the name recognition associated with the
Company's service marks and the national recognition gained by the Company's
franchise concepts.
The Company also faces competition in connection with the sale of franchises.
Prospective franchisees of the Company frequently evaluate other franchise
opportunities before purchasing a franchise from the Company. The Company
believes that its franchise concepts compete favorably with other franchises
based on the fees charged by the Company, the Company's franchise support
services and the performance of its existing franchise concepts.
GOVERNMENT REGULATION
Fifteen states and the Federal Trade Commission impose pre-sale franchise
registration and/or disclosure requirements on franchisors. In addition, a
number of states and the District of Columbia have statutes which regulate
substantive aspects of the franchisor-franchisee relationship such as
termination, nonrenewal, transfer, discrimination among franchisees and
competition with franchisees.
Additional legislation, both at the federal and state levels, could expand
pre-sale disclosure requirements, further regulate substantive aspects of the
franchise relationship, and require the Company to file its franchise offering
circulars with additional states and the United States Department of laws. The
Company cannot predict the effect of future franchise legislation, but does not
believe there is any legislation currently under consideration which would have
a material adverse impact on its operations.
TRADEMARKS AND SERVICE MARKS
Grow Biz(R), Play It Again Sports(R), Once Upon A Child(R), Computer
Renaissance(R), Music Go Round(R) and Disc Go Round(R), among others, have been
registered as service marks by the Company with the United States Patent and
Trademark Office (the "USPTO"). The Company believes these marks are of
considerable value to its business and important to its marketing efforts. The
Company intends to protect its service marks by appropriate legal action where
and when necessary.
SEASONALITY
The Company's Play It Again Sports(R) and Once Upon A Child(R) franchise
concepts have experienced higher than average sales volume during the spring
months and during the back to school and holiday shopping seasons. This trend,
along with the related impact of Company-operated retail stores revenue, results
in higher than average royalty and merchandise revenue during the second, third
and fourth quarter for the Company.
EMPLOYEES
As of December 28, 1996, the Company employed 184 full-time employees, of which
13 are franchise salespersons, 58 are franchise support personnel, 49 are
administrative and 64 are retail sales staff. The Company also employs 64
part-time employees at its retail stores.
ITEM 2: PROPERTIES
The Company owns its headquarters facility. In December 1996, the Company closed
its warehouse activities previously located at an 18,000 square foot warehouse
facility in Bloomington, Minnesota. The lease for this facility expires in
January 1997. The Company believes that its executive space is sufficient to
meet its current needs and for the near future.
The Company leases space for its 20 retail stores, typically for a fixed monthly
rental and operating costs. One lease is due to expire in 1997, nine leases in
1998, six in 1999, one in 2000, one in 2001 and two in 2002.
ITEM 3: LEGAL PROCEEDINGS
In 1995, an early partner in the original Play It Again Sports store commenced
an action against the Company relating to, among other things, the development
of stores under a 1992 retail store agreement. The suit alleges breach of
contract, fraud and misrepresentation, and violation of federal and state
anti-racketeering (RICO) statutes. The plaintiff seeks monetary damages in
excess of $50,000, treble damages under the RICO claim and among other things,
injunctive an declaratory relief. The Company believes the suit is without merit
and intends to vigorously defend the action. When concluded, in the opinion of
management, based upon information it presently possesses, the action will not
have a material adverse affect on the Company's financial position.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1996.
ITEM 4A: EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company, who are elected by and serve at the
discretion of the Company's Board of Directors, are as follows:
NAME AGE POSITION
- ---- --- --------
K. Jeffrey Dahlberg 43 Chairman of the Board
Ronald G. Olson 56 President, Chief Executive Officer, Director
David J. Osdoba, Jr. 41 Vice President of Finance and Chief Financial
Officer
Gaylen L. Knack 37 Vice President and General Counsel
Charles V. Kanan 45 President / Play It Again Sports(R)
Ted R. Manley 47 President / Once Upon A Child(R)
Michael E. Flynn 48 President / Computer Renaissance(R)
William L. Shell II 40 President / Music Go Round(R)
Brad D. Tait 47 President / Disc Go Round(R)
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K. JEFFREY DAHLBERG has served as Chairman of the Board of Directors of the
Company since January 1990. Mr. Dahlberg served as President and Chief Executive
Officer of Dahlberg, Inc., a publicly-held manufacturer and distributor of
hearing aids and franchisor of hearing aid retail stores, from June 1988 to
December 1992 and as a director of Dahlberg, Inc. until July 1993. He has served
as Chairman of the Board of Franchise Business Systems, Inc., a franchise
consulting firm, since July 1988.
RONALD G. OLSON has served as President, Chief Executive Officer and a Director
of the Company since January 1990. Mr. Olson has been President and Chief
Executive Officer of Franchise Business Systems, Inc. since July 1988.
DAVID J. OSDOBA, JR. has served as Vice President of Finance and Chief Financial
Officer of the Company since August 1996. From August 1993 through August 1996,
Mr. Osdoba served as Corporate Controller of the Company. Mr. Osdoba was an
independent financial and business consultant from January 1991 through July
1993. He was Chief Financial Officer for Harold Corporation, a Minneapolis based
women's specialty retailer, from September 1987 to December 1990.
GAYLEN L. KNACK has served as Vice President and General Counsel of the Company
since August 1996. From April 1991 through July 1996, Mr. Knack was a Principal
in the Minneapolis law firm of Gray, Plant, Mooty, Mooty and Bennett, P.A.
CHARLES V. KANAN has served as President of Play It Again Sports(R) since
January 1994. From December 1990 to December 1991 Mr. Kanan served as Vice
President of Marketing, and from January 1992 to December 1993, he served as
Executive Vice President, of Dahlberg, Inc.
TED R. MANLEY has served as President of Once Upon A Child(R) since December
1996 and General Manager since July 1994. Mr. Manley was Senior Vice President
of Braun's Fashions Corporation, a women's retail clothing store chain, from
November 1989 to June 1994.
MICHAEL E. FLYNN has served as President of Computer Renaissance(R) since
December 1996 and General Manager since March 1995. Mr. Flynn was a divisional
merchandise manager of electronics and luggage for the department store division
of Dayton Hudson Corporation from August 1986 to March 1995.
WILLIAM L. SHELL II has served as President of Music Go Round(R) since December
1996 and General Manager since March 1996. From February 1993 to March 1996, Mr.
Shell served as a member of the Company's management team focused on the
development of the Computer Renaissance(R) and Music Go Round(R) concepts as
well as Corporate-owned retail stores. Mr. Shell served as President and founder
of Hi-Tech Consignments, the predecessor of Music Go Round(R) from November 1986
until February 1993. Prior to Hi-Tech Consignments, Mr. Shell was a marketing
and sales executive in AT&T's computer division.
BRADLEY D. TAIT has served as President of Disc Go Round(R) since December 1996
and General Manager since March 1996. From February 1995 through February 1996,
Mr. Tait was divisional Vice President of Merchandising for the mall store
division of the Musicland Stores Corporation and Vice President of stores
operations from January 1993 through January 1995.
The term of office of each executive officer is from one annual meeting of
directors until the next annual meeting of directors or until a successor for
each is elected.
There are no arrangements or understandings among any of the executive officers
of the Registrant and any other person (not an officer or director of the
Registrant acting as such) pursuant to which any of the executive officers were
selected as an officer of the Registrant.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The stock is traded on the NASDAQ National Market System under the symbol GBIZ.
The table below sets forth the high and low bid prices of the Company's common
stock as reported by NASDAQ for the periods indicated:
1996: First Second Third Fourth 1995: First Second Third Fourth
- ---------- ----------- ----------- ------------ ----------- --------- ----------- ----------- ------------ -----------
HIGH 11 1/4 8 1/8 9 3/4 10 1/2 HIGH 13 5/16 12 13/16 11 10 1/8
LOW 7 5/8 7 32/35 6 27/32 8 3/4 LOW 10 10 1/2 9 1/4 9
At March 5, 1997, there were 6,286,569 shares of common stock outstanding held
by 296 shareholders of record. The Company has not paid any cash dividends on
its common stock and does not anticipate paying cash dividends in the
foreseeable future. There were no unregistered sales of the Company's common
stock in fiscal year ended 1996.
ITEM 6: SELECTED FINANCIAL DATA.
The following table sets forth selected financial information for the periods
indicated. The information should be read in conjunction with the financial
statements and related notes discussed in Item 14, and Management's Discussion
and Analysis of Financial Condition and Results of Operations discussed in Item
7.
Pro Forma
Fiscal Year Ended(1) Fiscal Year Ended(2)
----------- ---------- ---------- ----------- ---------- -----------
December December December December December December
26, 1992 25, 1993 31, 1994 30, 1995 28, 1996 31, 1994
----------- ---------- ---------- ----------- ---------- -----------
REVENUE: (in thousands, except per store data)
Merchandise sales $23,175 $45,028 $ 71,425 $ 84,043 $ 71,737 $ 71,914
Royalties 1,613 3,689 7,645 11,560 14,965 7,805
Franchise fees 2,344 2,733 3,963 3,889 4,162 4,015
Advertising and other 248 353 553 721 686 603
------- ------- -------- -------- -------- --------
Total revenue 27,380 51,803 83,586 100,213 91,550 84,337
Cost of merchandise sold 21,686 41,695 65,479 76,192 63,856 65,959
Selling, general and
administrative expenses 4,920 9,331 15,889 20,980 23,636 16,430
------- ------- -------- -------- -------- --------
Income from operations 774 777 2,218 3,041 4,058 1,948
Interest income (expense), net (84) (8) 478 296 195 437
Equity in net loss of
unconsolidated affiliates - (160) (416) - - (416)
------- ------- -------- -------- -------- --------
Income before income
taxes 690 609 2,280 3,337 4,253 1,969
Provision for income taxes 283 265 900 1,308 1,667 778
------- ------- -------- -------- -------- --------
Net income $ 407 $ 344 $ 1,380 $ 2,029 $ 2,586 $ 1,191
======= ======= ======== ======== ======== ========
Net income per common share $ .08 $ .06 $ .19 $ .28 $ .40 $ .16
======= ======= ======== ======== ======== ========
Weighted average shares
outstanding(3) 5,018 6,072 7,440 7,351 6,516 7,440
======= ======= ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital $ 149 $ 16,915 $ 12,441 $ 11,068 $ 8,516
Total assets 9,709 31,784 39,564 34,024 29,177
Total debt 2,431 1,728 615 415 264
Shareholders' equity 1,109 19,848 21,685 21,192 17,698
SELECTED FINANCIAL RATIOS
Return on average assets 7.5% 1.7% 3.9% 5.5% 8.2%
Return on average equity 67.1% 3.3% 6.6% 9.5% 13.3%
(1) The Company's fiscal year ends on the last Saturday in December, which
results in a 52 or 53-week year. Fiscal 1994 was 53 weeks. Fiscal 1995
and 1996 were 52 weeks.
(2) The Company acquired certain assets of CDX Audio Development, Inc. (CDX)
on July 1, 1994. The pro forma information is presented as if these
acquisitions occurred on December 26, 1993.
(3) See Note 2 of Notes to the Company's Financial Statements for an
explanation of the determination of weighted average shares outstanding.
GROW BIZ INTERNATIONAL, INC.
Unaudited Pro Forma Condensed Statement of Operations
(dollars in thousands, except per share amounts)
For the Fiscal Year-Ended December 31,1994
--------------------------------------------------
CDX Adjustments
Grow Biz (Note a ) (Note b) Pro Forma
----------- ---------- ------------ -------------
REVENUE:
Merchandise sales $ 71,425 $ 489 $ -- $ 71,914
Royalties 7,645 160 -- 7,805
Franchise fees 3,963 52 -- 4,015
Advertising and other 553 50 -- 603
---------- ---------- ---------- ----------
Total revenue 83,586 751 -- 84,337
COST OF MERCHANDISE SOLD 65,479 480 -- 65,959
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 15,889 371 170(1) 16,430
---------- ---------- ---------- ----------
Income loss from operations 2,218 (100) (170) 1,948
INTEREST EXPENSE AND OTHER, net 62 -- (41)(2) 21
---------- ---------- ---------- ----------
Income loss before income taxes 2,280 (100) (211) 1,969
PROVISION FOR INCOME TAXES 900 (40) (82)(3) 778
---------- ---------- ---------- ----------
NET INCOME $ 1,380 $ (60) $ (129) $ 1,191
========== ========== ========== ==========
NET INCOME PER COMMON SHARE $ .19 $ .16
========== ==========
SHARES USED IN PER COMMON
SHARE COMPUTATION 7,440,000 7,440,000
========== ==========
GROW BIZ INTERNATIONAL, INC.
Notes to Unaudited Pro Forma Condensed Statement of Operations
For the Fiscal Year Ended December 31, 1994
(a) Operations are for the period January 1, 1994 through the acquisition date
(June 30, 1994).
(b) The pro forma condensed statement of operations gives effect to the
following pro forma adjustments:
(1) Represents amortization charges related to the intangible assets
acquired as a part of the purchase.
(2) Represents interest costs associated with the acquisition debt
incurred.
(3) Represents adjustments to reflect the necessary estimated net
tax effects of the transactions and pro forma adjustments
described herein using current tax rates.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The following table sets forth selected information from the Company's
Consolidated Statements of Operation expressed as a percentage of total revenue
and the percentage changes in the dollar amounts from the prior period:
-----------------------------------------------------------------------------------------
Fiscal Year Ended
December 31, December 30, December 28, Fiscal 1995 Fiscal 1996
1994 1995 1996 over 1994 over 1995
-----------------------------------------------------------------------------------------
Revenues
Merchandise sales 85.5% 83.9% 78.4% 17.7% (14.6%)
Royalties 9.1 11.5 16.3 51.2 29.4
Franchise fees 4.7 3.9 4.6 (1.9) 7.0
Advertising and other 0.7 0.7 0.7 30.3 (4.8)
----- ----- ----- ----- ----
Total revenues 100.0 100.0 100.0 19.9 (8.6)
Cost of merchandise sold 78.3 76.0 69.7 16.4 (16.2)
Selling, general and
administrative expenses 19.0 20.9 25.9 32.7 12.7
----- ----- ----- ----- ----
Income from operations 2.7 3.1 4.4 37.1 33.4
Interest and other income
(expense), net -- 0.2 0.2 377.4 (34.1)
----- ----- ----- ----- ----
Income before income taxes 2.7 3.3 4.6 46.4 27.5
Provision for income taxes 1.1 1.3 1.8 45.3 27.5
----- ----- ----- ----- ----
Net income 1.6% 2.0% 2.8% 47.1% 27.5%
===== ===== ===== ===== ====
RESULTS OF OPERATIONS
REVENUES
Merchandise sales includes the sale of product to franchisees through the buying
group and retail sales at the Company-owned stores as follows:
1994 1995 1996
---------------------------------------------------
Buying Group $ 63,708,400 $ 72,971,600 $ 58,437,100
Retail Sales 7,716,700 11,071,500 13,299,700
Buying group sales decreased 19.9% in 1996 from 1995 after several years of
revenue increases. This coincides with the strategic change initiated in 1995 of
franchisees sourcing more new product directly from our suppliers. Buying group
sales in 1997 are expected to remain consistent with the 1996 results as the
Company will continue to provide the Play It Again Sports(R) franchisees with a
source for purchasing new product. Retail sales at Company-owned stores
increased 43.5% in 1995 over 1994 and 20.1% in 1996 over 1995 primarily as a
result of opening or acquiring five Company-owned stores in 1995 and comparable
store sales increase in 1996.
Royalties and franchise fees from franchising activities were as follows:
1994 1995 1996
---------------------------------------------------
Royalties $ 7,644,600 $ 11,565,500 $ 14,964,800
Franchise Fees 3,963,000 3,888,500 4,161,600
Royalties are a derivative of system wide retail sales and have increased by
$3.9 million and $3.4 million in 1995 and 1996, respectively, as a result of
opening additional franchise stores and of increases in comparable store sales.
Comparable store sales increases (decreases) and average store sales for stores
open at least one year at December 28, 1996 for each of the five retail concepts
are shown in the following table:
Comparable Store Sales
Increase (Decrease) from 1995 Average Store Sales
----------------------------- -------------------
Play It Again Sports(R) (.6%) $ 437,000
Once Upon A Child(R) 13.8% 303,000
Computer Renaissance(R) 31.4% 880,000
Music Go Round(R) 4.6% 570,000
Disc Go Round(R) .5% 235,000
Franchise fees are recognized as revenue essentially when the related franchise
store opens. Store openings and related franchise fees have not changed
drastically over the last three years. The 1996 increase is due to a higher
average per store fee and the recognition of more transfer fees than in prior
years.
COST OF MERCHANDISE SOLD
Cost of merchandise sold includes the cost of merchandise sold through the
buying group and at Company-owned retail stores. Over the past three years, cost
of merchandise sold as a percentage of the related revenue is shown in the
following table:
1994 1995 1996
-------------------------------------------
Buying Group 95.4% 95.1% 95.2%
Retail Stores 60.4 61.4 61.7
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased $5.1 million from 1994 to
1995 and $2.7 million from 1995 to 1996. These increases are primarily the
result of an increase in the number of personnel needed to support the growing
franchise system and to related costs such as facilities, computer systems and
travel expenses. As a percentage of revenue, selling, general and administrative
expenses were 19.0% and 20.9% in 1994 and 1995, respectively, and increased to
25.9% of revenue in 1996 as a result of the reduction in merchandise sales.
Operating expense increases in 1997 are anticipated to be more moderate than the
increases experienced in the previous two years and as a percentage of revenue
should be consistent with 1996.
NET INTEREST
Net interest income was $477,800, $295,500 and $194,700 in 1994, 1995 and 1996,
respectively. Interest income was earned on investments in short-term,
high-grade investments and interest received on accounts receivable balances.
Also included in interest income for 1994 is a gain of $62,000 resulting from
early repayment of debt. The decrease in interest income in 1995 and 1996 was
due to the Company having lower cash balances as a result of the repurchase of
shares of the Company's common stock.
EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATES
During 1994, the Company wrote-off its investment in joint venture agreements in
Mexico and Germany, resulting in a $416,000 loss.
PROVISION FOR INCOME TAXES
The provision for income taxes was at an effective rate of 39.5% for fiscal
1994, 39.2% for fiscal 1995 and 39.2% for fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the year with $1.4 million cash.
During the year ended December 28, 1996, the Company's operating activities
provided $7.5 million of cash. This increase in cash available from operations,
other than net income and depreciation, is primarily due to a $2.9 million
reduction in receivables as franchisees source more product on a direct basis
and a $1.6 million reduction in inventory as the Company has reduced its
warehouse inventory levels, offset by a $1.4 million decrease in accounts
payable.
During the year ended December 28, 1996, the Company's investing activities
provided $65,300 in cash due to the redemption of $420,000 of short term
investments offset by a nominal amount of capital expenditures.
The Company's use of $6.3 million from financing activities during 1996 was
primarily due to the repurchase of 740,194 shares of the Company's common stock.
In 1995, the Company announced its intention to buy back up to 500,000 shares of
its common stock on the open market. In February 1996 and again in June 1996 the
buy back was extended to include an additional 500,000 shares bringing the total
shares the Company is authorized to buy back to 1,500,000. As of March 5, 1997
1,073,204 shares, at an average price of $8.68 per share had been purchased.
The Company has a $5.0 million committed revolving line of credit agreement
which is due for renewal on July 31, 1997. Borrowings against the line are due
on demand and carry an interest rate of prime which was 8.25% at December 28,
1996. At December 28, 1996, the Company had no borrowings against the line.
The Company believes that its current cash position, cash generated from future
operations, availability of line of credit borrowings and additional capacity
for debt will be adequate to meet the Company's current obligations and
operating needs.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) has issued Statement No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" and Statement No. 123, "Accounting for Stock-Based Compensation".
The Company has adopted statement No. 121 and has disclosed the impact of
statement No. 123 in the footnotes to the financial statements.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Grow Biz International, Inc.
Index to Financial Statements
Balance Sheet Page 19
Statement of Operations Page 20
Statement of Changes in Shareholders' Equity Page 21
Statements of Cash Flows Page 22
Notes to Financial Statements Page 23
Report of Independent Public Accountants Page 31
GROW BIZ INTERNATIONAL, INC.
Balance Sheets
December 30, December 28,
1995 1996
---------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 101,500 $ 1,388,800
Short-term investments 420,000 --
Receivables, less allowance for doubtful accounts
of $678,000 and $930,000 16,372,200 13,171,400
Inventories 4,292,000 2,716,000
Prepaid expenses and other 985,700 862,900
Deferred income taxes (Note 8) 1,451,500 1,726,400
------------ ------------
Total current assets 23,622,900 19,865,500
------------ ------------
NOTES RECEIVABLE -- 339,800
PROPERTY AND EQUIPMENT:
Furniture and equipment 5,418,100 ,553,100
Building and building improvements 3,230,900 3,305,800
Less - accumulated depreciation and amortization (1,798,000) (2,879,600)
------------ ------------
Property and equipment, net 6,851,000 5,979,300
------------ ------------
OTHER ASSETS:
Noncompete agreements and other, net of accumulated
amortization of $2,228,200 and $2,788,600 2,415,500 1,855,200
Goodwill, net of accumulated amortization of $78,200
and $128,800 1,135,000 1,136,700
------------ ------------
Total other assets 3,550,500 2,991,900
------------ ------------
$ 34,024,400 $ 29,176,500
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,078,500 $ 5,670,300
Accrued liabilities 1,195,600 1,275,800
Current maturities of long-term debt (Note 7) 137,500 134,900
Deferred franchise fee revenue 4,143,000 4,269,000
------------ ------------
Total current liabilities 12,554,600 11,350,000
LONG TERM DEBT (Note 7) 277,700 129,000
COMMITMENTS AND CONTINGENCIES (Notes 5 and 9) -- --
SHAREHOLDERS' EQUITY (Note 5)
Undesignated stock, no par, 5,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, no par, 10,000,000 shares authorized,
6,958,468 shares issued and outstanding 1995
6,263,444 shares issued and outstanding 1996 17,033,000 10,952,900
Retained earnings 4,159,100 6,744,600
------------ ------------
Total shareholders' equity 21,192,100 17,697,500
------------ ------------
$ 34,024,400 $ 29,176,500
============ ============
The accompanying notes are an integral part of these financial statements.
GROW BIZ INTERNATIONAL, INC.
Statements of Operations
Fiscal Year Ended
-----------------
December 31, December 30, December 28,
1994 1995 1996
------------------------------------------------------------
REVENUE
Merchandise sales $ 71,425,100 $ 84,043,100 $ 71,736,800
Royalties 7,644,600 11,560,500 14,964,800
Franchise fees 3,963,000 3,888,500 4,161,600
Advertising and other 553,100 720,700 686,400
------------- ------------- -------------
Total revenues 83,585,800 100,212,800 91,549,600
COST OF MERCHANDISE SOLD 65,478,600 76,191,400 63,855,600
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 15,889,500 20,980,300 23,636,200
------------- ------------- -------------
Income from operations 2,217,700 3,041,100 4,057,800
INTEREST EXPENSE (101,300) (49,700) (56,900)
INTEREST INCOME 579,100 345,200 251,600
EQUITY IN NET LOSS OF UNCONSOLIDATED
AFFILIATES (Note 10) (416,000) -- --
------------- ------------- -------------
Income before income taxes 2,279,500 3,336,600 4,252,500
PROVISION FOR INCOME TAXES (Note 8) 900,000 1,308,000 1,667,000
------------- ------------- -------------
NET INCOME $ 1,379,500 $ 2,028,600 $ 2,585,500
============= ============= =============
NET INCOME PER COMMON SHARE $ 0.19 $ 0.28 $ 0.40
============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 7,440,000 7,351,000 6,516,000
============= ============= =============
The accompanying notes are an integral part of these financial statements.
GROW BIZ INTERNATIONAL, INC.
Statements of Changes in Shareholders' Equity
Fiscal years ended December 31, 1994, December 30, 1995 and December 28, 1996
Common Stock
------------ Retained
Shares Amount Earnings
---------------------------------------------------
BALANCE, December 25, 1993 7,079,250 $ 19,096,500 $ 751,000
Stock options exercised and related tax benefits 73,500 347,000 -
Stock warrants exercised, net (Note 5) 51,112 111,000 -
Net income - - 1,379,500
--------- ------------ ------------
BALANCE, December 31, 1994 7,203,862 19,554,500 2,130,500
Repurchase of common stock (Note 5) (321,900) (2,939,700) -
Stock options exercised and related tax benefits 76,506 418,200 -
Net income - - 2,028,600
--------- ------------ ------------
BALANCE, December 30, 1995 6,958,468 17,033,000 4,159,100
Repurchase of common stock (Note 5) (740,194) (6,266,100) -
Stock options exercised and related tax benefits 45,170 186,000 -
Net income - - 2,585,500
--------- ------------ ------------
BALANCE, December 28, 1996 6,263,444 $ 10,952,900 $ 6,744,600
========= ============ ============
The accompanying notes are an integral part of these financial statements.
GROW BIZ INTERNATIONAL, INC.
Statements of Cash Flows
Fiscal Year Ended
-----------------
December 31, December 30, December 28,
1994 1995 1996
-------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 1,379,500 $ 2,028,600 $ 2,585,500
Adjustments to reconcile net income to net cash
provided by (used for) operating activities -
Depreciation and amortization 1,319,400 1,765,400 1,785,000
Deferred income tax (794,400) (378,100) (274,900)
Equity in net loss of affiliates (Note 10) 416,000 -- --
Change in operating assets and liabilities:
Receivables (5,630,700) 363,200 2,861,000
Inventories (874,300) (1,302,000) 1,576,000
Prepaid expenses and other (218,800) 263,300 122,800
Accounts payable 3,762,000 (2,739,100) (1,408,200)
Accrued liabilities 1,919,900 (1,219,000) 116,700
Deferred franchise fee revenue 1,305,500 (747,000) 126,000
----------- ----------- -----------
Net cash provided by (used for)
operating activities 2,584,100 (1,964,700) 7,489,900
----------- ----------- -----------
INVESTING ACTIVITIES:
Redemption of short-term investments 1,246,400 6,337,300 420,000
Purchases of property and equipment, net (4,017,700) (2,335,800) (297,000)
Increase in other assets (459,900) (164,900) (57,700)
Acquisitions (Note 4) (2,358,000) -- --
----------- ----------- -----------
Net cash provided by (used for)
investing activities (5,589,200) 3,836,600 65,300
----------- ----------- -----------
FINANCING ACTIVITIES:
Payments on long-term debt, net (1,136,900) (214,800) (151,300)
Repurchase of common stock (Note 5) -- (2,939,700) (6,266,100)
Proceeds from stock option and warrant exercises 331,000 277,200 149,500
----------- ----------- -----------
Net cash used for financing activities (805,900) (2,877,300) (6,267,900)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,811,000) (1,005,400) 1,287,300
CASH AND CASH EQUIVALENTS, beginning of period 4,917,900 1,106,900 101,500
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,106,900 $ 101,500 $ 1,388,800
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 111,900 $ 47,600 $ 50,200
=========== =========== ===========
Cash paid for income taxes $ 151,000 $ 2,978,300 $ 1,831,500
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
GROW BIZ INTERNATIONAL, INC.
Notes to the Financial Statements
December 30, 1995 and December 28, 1996
1. ORGANIZATION AND BUSINESS:
Grow Biz International, Inc. (the Company) offers licenses to operate retail
stores using the service marks "Play It Again Sports(R)", "Once Upon A
Child(R)", "Music Go Round(R)", "Computer Renaissance(R)" and "Disc Go
Round(R)". In addition, the Company sells inventory to its franchisees through
its "Buying Group" and operates retail stores. The Company has a 52/53-week
fiscal year which ends on the last Saturday in December.
Since 1992, the Company acquired certain assets of the following entities with
operating results included in the financial statements from the date of
acquisition:
Entity Acquisition Year
------ ----------------
Sports Traders, Inc. (Buying Group) 1992
Play It Again Sports retail stores (3) 1992
Once Upon A Child, Inc. 1992
Hi Tech Consignments, Inc. (Music Go Round) 1993
Computer Renaissance, Inc. 1993
CDX Audio Development, Inc. (Disc Go Round) 1994
2. SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS SEGMENT INFORMATION
The Company is engaged in principally one business segment -- developing,
licensing, franchising and servicing a system of retail stores which buy, sell,
trade and consign used and new products.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with an original maturity
of three months or less. Cash equivalents are stated at cost which approximates
fair value.
SHORT-TERM INVESTMENTS
Short-term investments consist primarily of short-term marketable securities
which are stated at cost, which approximates market.
INVENTORIES
The Company values its inventories at the lower of cost or market, as determined
by the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization for
financial reporting purposes is provided on the straight-line method. Estimated
useful lives used in calculating depreciation and amortization are: five years
for furniture and equipment, thirty-five years for building and building
improvements and the shorter of the lease term or useful life for leasehold
improvements. Major repairs, refurbishments and improvements which significantly
extend the useful lives of the related assets are capitalized. Maintenance and
repairs, supplies and accessories are charged to expense as incurred.
OTHER ASSETS
Other assets consist primarily of covenants not to compete which are being
amortized on a straight-line basis over the terms of the agreements which range
from 3 to 10 years. Goodwill is being amortized on a straight-line basis over 15
to 40 years.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
ultimate results could differ from those estimates. The most significant area
which requires the use of management's estimates relates to the determination of
the allowance for doubtful accounts.
REVENUE RECOGNITION
The Company collects franchise fees when franchise agreements are consummated
and recognizes the franchise fees as revenue when substantially all initial
franchise services have been performed. The Company had deferred franchise fee
revenue of $4,143,000 and $4,269,000 at December 30, 1995 and December 28, 1996,
respectively. The Company collects royalties from each franchise based on retail
store gross sales. The Company recognizes royalties as revenue when earned.
Through July 1, 1995, the Company paid commissions when franchise agreements
were consummated. The Company deferred recognition of the commission expense
until the corresponding revenue was recognized. Deferred commission expense was
$347,800 and $133,100 at December 30, 1995 and December 28, 1996, respectively,
and is included in prepaid expenses and other in the accompanying balance
sheets. Subsequent to July 1, 1995, compensation consists of a base salary and a
non-refundable commission that is paid and expensed one-half upon awarding a
franchise and one-half when the store opens.
NET INCOME PER COMMON SHARE
Net income per common share was computed by dividing net income by the weighted
average number of shares of common stock and dilutive common stock equivalents
from the exercise of stock options and warrants using the treasury stock method.
RECLASSIFICATION
Certain 1994 and 1995 amounts in the financial statements have been reclassified
to conform with the 1996 financial statement presentation. These
reclassifications have no effect on net income or shareholders' equity as
previously reported.
3. RECEIVABLES:
The Company's receivables consisted of the following:
December 30, 1995 December 28, 1996
----------------------------------------------
Trade (Net) $ 15,092,000 $ 10,848,600
Royalty 1,077,100 1,709,000
Other 203,100 612,800
------------ ------------
$ 16,372,200 $ 13,171,400
============ ============
As part of its normal course of business, the Company requires Standby Letters
of Credit as collateral for a portion of its trade receivables from its
first-year and second-year stores.
4. ACQUISITIONS:
PURCHASE OF CERTAIN ASSETS OF CDX AUDIO DEVELOPMENT, INC.
In 1994, the Company purchased certain assets and the franchising rights and
assumed certain obligations of CDX Audio Development, Inc., a Company which
offered licenses to operate retail stores under the "CD Exchange" service marks.
At the time of acquisition there were 43 stores in operation. The Company paid
cash of $2,358,000. This included assets of $2,559,500 and the assumption of
liabilities totaling $201,500 associated with future obligations to provide
services to open additional franchise locations. Of the $2,358,000 total
purchase price, $1,209,000 was allocated to the value of existing franchise
agreements and $1,149,000 to goodwill and other intangible assets. The
statements of operations include the operations of certain assets of CDX Audio
Development, Inc. from the acquisition date. The following are the unaudited pro
forma results of operations for 1994, as if the above acquisition had occurred
at the beginning of the year:
December 31,
1994
-----------------
Revenue $ 84,337,000
Net income 1,191,000
Net income per common share $ .16
5. SHAREHOLDERS' EQUITY:
REPURCHASE OF COMMON STOCK
Since November 1995, the Company's Board of Directors authorized the repurchase
of up to 1,500,000 shares of the Company's common stock on the open market. As
of December 28, 1996, the Company had repurchased 1,062,094 shares of its stock
at an average price of $8.67 per share including 740,194 shares repurchased at
an average price of $8.47 per share in the year ended December 28, 1996.
STOCK OPTION PLANS
The Company has authorized up to 1,100,000 shares of common stock be reserved
for granting either nonqualified or incentive stock options to officers and key
employees under the Company's 1992 Stock Option Plan (the Plan). Grants can be
made by the board of directors or a board-designated committee at a price of not
less than 100% of the fair market value on the date of grant. If an incentive
stock option is granted to an individual who owns more than 10% of the voting
rights of the Company's common stock, the option exercise price may not be less
than 110% of the fair market value on the date of grant. The term of the options
may not exceed ten years after the date of grant, except in the case of
nonqualified stock options, whereby the terms are established by the board of
directors or a board-designated committee. Options may be exercisable in whole
or in installments, as determined by the board of directors or a
board-designated committee.
Stock options granted and exercised under the plan as of December 28, 1996 are
as follows:
Number of Shares Price Range
Outstanding at December 31, 1994 567,375 $ 2.00 - $ 14.50
Granted 96,000 10.50 - 12.38
Exercised (68,300) 2.00 - 10.00
Forfeited (6,500) 2.00 - 10.63
------- --------- ---------
Outstanding at December 30, 1995 588,575 2.00 - 14.50
Granted 357,000 7.25 - 9.00
Exercised (38,750) 2.00 - 10.00
Forfeited (190,700) 8.00 - 12.38
------- --------- ---------
Outstanding at December 28, 1996 716,125 2.00 - 14.50
======= ========= =========
Exercisable at December 28, 1996 358,750 $ 2.00 - $ 14.50
======= ========= =========
The Company sponsors a Stock Option Plan for Nonemployee Directors (the
`Nonemployee Directors Plan') and reserved a total of 100,000 common shares for
issuance to directors of the Company who are not employees. The Nonemployee
Directors Plan provides that each director who is not an employee of the Company
will receive an option to purchase 25,000 common shares upon initial election as
a director at a price equal to the fair market value on the date of grant. Each
option granted under the Nonemployee Directors Plan vests and becomes
exercisable in five equal increments of 5,000 shares, beginning one year after
the date of grant. During 1995, these options were cancelled and reissued as
described below.
The Company sponsors an Employee Stock Purchase Plan (`Employee Plan') and
reserved 100,000 shares of the Company's common stock for issuance to employees
who elect to participate. Under the Employee Plan, options are granted in
one-year phases which may be exercised at the end of each phase. The option
price will be 85% of the fair market value of such common stock on the
commencement date or termination date of the phase, whichever is lower. During
1996, the Company issued 6,420 shares under the plan at a price of $6.85. As of
December 28, 1996, contributions have been received for the issuance of 8,550
shares under phase three.
NONPLAN OPTIONS
The Company has granted options to four non-employee directors. Each director
received an option to purchase 25,000 shares of the Company's common stock at
$10 per share. Each option granted vests and becomes exercisable in increments
through 1998. During 1994, options were exercised for 5,000 shares; of the
remaining options 55,000 were exercisable at December 28, 1996.
SFAS NO. 123
The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized in the Statement of Operations.
The fair value of each option granted subsequent to January 1, 1995, in
accordance with FASB Statement No. 123, was estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates of 6.07% to 7.93% in 1995 and 6.01% to
6.81% in 1996, expected life of five years for 1995 and two to five years for
1996; expected volatility of 47.05% to 56.01% in 1995 and 39.78% to 44.59% in
1996.
Based on the above assumptions, the Company's net income and net income per
common share would have been reduced to the following pro forma amounts:
1995 1996
--------------------------------
Net Income: As Reported $ 2,028,600 $ 2,585,500
Pro Forma 1,876,500 2,269,984
Net Income Per Common Share: As Reported $ .28 $ .40
Pro Forma .26 .35
WARRANTS
In connection with a 1992 private placement, there are outstanding warrants to
purchase 75,000 shares of the Company's common stock at $10.00 per share. The
warrants expire in 1998.
6. NOTE PAYABLE:
The Company has a $5.0 million committed revolving line of credit agreement
which is due for renewal on July 31, 1997. Borrowings against the line are due
on demand and carry an interest rate of prime which was 8.25% at December 28,
1996. At December 28, 1996, the Company had no borrowings against the line.
7. LONG-TERM DEBT:
The Company's long-term debt consisted of the following:
December 30, December 28,
1995 1996
------------------------------------
Note payable, interest imputed at 8.0%
four quarterly payments of $40,688 due beginning
April of 2001 through January 2002 $ 92,600 $ 92,600
Other notes payable 322,600 71,300
------------ ------------
Total debt 415,200 263,900
Less - current maturities 137,500 134,900
------------ ------------
Total long-term debt $ 277,700 $ 129,000
============ ============
Future maturities of total debt are $134,900 in 1997, $36,400 in 1998 and
$92,600 thereafter.
8. INCOME TAXES:
Components of the provision for income taxes are as follows:
December 31, December 30, December 28,
1994 1995 1996
----------------------------------------------------------
Currently payable:
Federal $ 1,553,400 $ 1,511,100 $ 1,701,300
State 141,000 175,000 240,600
------------ ------------ ------------
Subtotal 1,694,400 1,686,100 1,941,900
Deferred income tax benefit (794,400) (378,100) (274,900)
------------ ------------ ------------
Total tax provision $ 900,000 $ 1,308,000 $ 1,667,000
============ ============ ============
The effective tax rate differs from the federal statutory rate due primarily to
the following:
December 31, December 30, December 28,
1994 1995 1996
-------------------------------------------------------------
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 4.1 3.4 3.7
Nondeductible meals and entertainment 2.1 1.1 0.8
Tax exempt interest income (3.1) (0.9) -
Other, net 2.4 1.6 0.7
---- ---- ----
39.5% 39.2% 39.2%
==== ==== ====
Deferred income taxes are the result of provisions of the tax laws that either
require or permit certain items of income or expense to be reported for tax
purposes in different periods than they are reported for financial reporting.
The components of the deferred tax asset are as follows:
December 30, December 28,
1995 1996
------------------------------------
Deferred franchise fees $ 902,800 $ 929,500
Accounts receivable reserves 373,200 470,600
Inventory reserves 123,100 35,500
Other 52,400 290,800
----------- -----------
Net deferred tax asset $ 1,451,500 $ 1,726,400
=========== ===========
9. COMMITMENTS AND CONTINGENCIES:
EMPLOYEE BENEFIT PLAN
The Company provides a 401(k) Savings Incentive Plan which covers substantially
all employees. The plan provides for matching contributions and optional
profit-sharing contributions at the discretion of the board of directors.
Employee contributions are fully vested; matching and profit-sharing
contributions are subject to a five-year service vesting schedule. Contributions
to the plan for 1994, 1995 and 1996 were $139,300, $205,100 and $267,000,
respectively.
OPERATING LEASES
The Company conducts all of its retail operations in leased facilities that
expire over the next six years. A majority of these leases require the Company
to pay maintenance, insurance, taxes and other expenses in addition to minimum
annual rent. Total rent expense under these operating leases was $1,033,000 in
1996, $850,800 in 1995, and $590,500 in 1994. As of December 28, 1996, minimum
rental commitments under noncancelable operating leases are: $1,013,700 in 1997,
$857,300 in 1998, $306,600 in 1999, $178,900 in 2000, $97,500 in 2001 and
$47,200 thereafter.
The Company rents retail space from PIAS Holdings, a partnership of two of the
Company's officers, through an agreement that expires September 30, 2000.
Payments under this agreement were approximately $47,000, $59,000 and $66,000 in
1994, 1995 and 1996, respectively.
CONSULTING AGREEMENTS
The Company has a consulting agreement with a former shareholder in which the
Company is required to pay $35,000 per year through 1999.
The Company has a consulting agreement with the former owners of Once Upon A
Child, Inc. The agreement requires the Company to pay $3,000 per month through
December 1997.
The Company has consulting agreements with the former owners of Computer
Renaissance, Inc. The agreements require the Company to pay the following
percentage of all receipts from franchising Computer Renaissance retail stores
during the following periods: June 1, 1996 through May 31, 1997 - 2%; June 1,
1997 through May 31, 1998 - 1%.
POINT OF SALE SOFTWARE
In 1995, the Company purchased for $260,000 the point-of-sale software which it
licenses for use in its retail franchise stores. In addition, the Company is
required to pay a fee for each system installed in franchise or Company-owned
stores through December 31, 1999; the minimum required fees relating to the
acquisition was $1,150,000. The Company has incurred fees of $360,000 for
systems installed through 1996.
LITIGATION
In 1995, an early partner in the original Play It again Sports store commenced
an action against the Company relating to, among other things, the development
of stores under a 1992 retail store agreement. The suit alleges breach of
contract, fraud and misrepresentation, and violation of federal and state
anti-racketeering (RICO) statutes. The plaintiff seeks monetary damages in
excess of $50,000, treble damages under the RICO claim and among other things,
injunctive and declaratory relief. The Company believes the suit is without
merit and intends to vigorously defend the action. When concluded, in the
opinion of management, based upon information it presently possesses, the action
will not have a material adverse effect on the Company's financial position.
10. INVESTMENTS IN AFFILIATED COMPANIES:
In 1994, the Company recognized a loss of $416,000 in connection with the
write-off of its investment in Play It Again Sports(R) joint venture agreements
in Mexico and Germany.
11. QUARTERLY FINANCIAL DATA:
The Company's unaudited quarterly results for the years ended December 28, 1996
and December 30, 1995 are as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------------------------------------
1996
Total Revenue $ 25,126,400 $ 25,008,800 $ 21,573,900 $19,840,500
Income from Operations 543,000 725,300 1,385,000 1,404,500
Net Income 330,200 467,500 887,700 900,100
Net Income Per Common Share $ .05 $ .07 $ .14 $ .14
1995
Total Revenue $ 25,414,000 $ 27,782,100 $ 25,095,300 $21,921,400
Income from Operations 553,100 1,106,900 854,500 526,600
Net Income 372,200 718,300 583,900 354,200
Net Income Per Common Share $ .05 $ .10 $ .08 $ .05
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Grow Biz International, Inc.:
We have audited the accompanying balance sheets of Grow Biz International, Inc.
(a Minnesota corporation) as of December 30, 1995 and December 28, 1996, and the
related statements of operations, changes in shareholders' equity and cash flows
for each of the three years in the period ended December 28, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Grow Biz International, Inc. as
of December 30, 1995 and December 28, 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 28,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
February 4, 1997
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The section entitled "Election of Directors" appearing in the Registrant's proxy
statement for the annual meeting of stockholders to be held on April 30, 1997,
sets forth certain information with respect to the directors of the Registrant
and the required information is incorporated herein by reference. Certain
information with respect to persons who are or may be deemed to be executive
officers of the Registrant is set forth under the caption "Executive Officers of
the Registrant" in Part I of this report.
ITEM 11: EXECUTIVE COMPENSATION.
The section entitled "Executive Compensation" appearing in the Registrant's
proxy statement for the annual meeting of stockholders to be held on April 30,
1997, sets forth certain information with respect to the compensation of
management of the Registrant and the required information is incorporated herein
by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The sections entitled "Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers" appearing in the Registrant's proxy statement
for the annual meeting of stockholders to be held on April 30, 1997, set forth
certain information with respect to the ownership of the Registrant's
Common Stock and the required information is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The section entitled "Certain Transactions" appearing in the Registrant's proxy
statement for the annual meeting of stockholders to be held on April 30, 1997,
sets forth certain information with respect to certain business
relationships and transactions between the Registrant and its directors and
officers and the required information is incorporated herein by reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a.) The following documents are filed as a part of this Report:
1. FINANCIAL STATEMENTS.
The financial statements filed as part of this report are listed on
the Index to Financial Statements on page 18.
2. FINANCIAL STATEMENT SCHEDULES.
Index to Financial Statement Schedules
Page
Report of Independent Public Accountants on schedule ......... 35
II. Valuation and Qualifying Accounts ................... 36
3. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.1 Articles of Incorporation, as amended (Exhibit 3.1)(1)
3.2 By-laws, as amended and restated to date (Exhibit 3.2)(1)
4.1 Form of Stock Purchase Warrant to Hayne, Miller & Farni, Inc. (1992) (Exhibit 4.2)(1)
4.2 Revised form of Stock Purchase Warrant to Hayne, Miller & Farni, Inc. (1992) (Exhibit 4.3)(1)
10.1 Form of franchise agreement for Play It Again Sports(R)(Exhibit 10.1)(3)
10.2 Form of franchise agreement for Once Upon A Child(R)(Exhibit 10.2)(3)
10.3 Form of franchise agreement for Computer Renaissance(R)(Exhibit 10.3) (3)
10.4 Form of franchise agreement for Music Go Round(R)(Exhibit 10.4)(3)
10.5 Form of franchise agreement for Disc Go Round(R)(Exhibit 10.5)(3)
10.6 Lease for 3505 Hennepin Avenue, Minneapolis Minnesota (Exhibit 10.4)(1)
10.7 Asset Purchase Agreement dated January 24, 1992 with Sports Traders, Inc. and James D.
Van Buskirk ("Van Buskirk") concerning acquisition of wholesale business, including
amendment dated March 11, 1992 (Exhibit 10.6(a))(1)
10.8 Retail store agreement dated January 24, 1992 with Van Buskirk (Exhibit 10.6(b))(1)
10.9 Noncompetition and Consulting agreement dated January 1, 1990, as amended
January 24, 1992, with Martha Morris (Exhibit 10.7)(1)
10.10 Asset Purchase Agreement dated April 1, 1993 concerning purchase of assets of Computer
Renaissance, Inc., including stock option agreement (Exhibit 10.12)(1)
10.11 Asset Purchase Agreement dated July 1, 1994 for purchase of assets of CDX Audio
Development, Inc. (Exhibit 10.13)(3)
10.12 1992 Stock Option Plan, including forms of stock option agreement (Exhibit 10.12)(1)(3)
10.13 Amendment No. 1 to the 1992 Stock Option Plan (Exhibit 10.15) (2)
10.14 Amendment No. 2 to the 1992 Stock Option Plan (Exhibit 10.16) (2)
10.15 Nonemployee Director Stock Option Plan, as amended, including form of stock option
agreement (Exhibit 10.16)(2)(3)
10.16 Employee Stock Purchase Plan of 1994 (Exhibit 10.17)(2)(3)
10.17 Real Estate Purchase Agreement for Purchase of the Company's headquarters (Exhibit 10.18)(2)
10.18 Consulting and Noncompetition Agreement dated November 6, 1992 with Lynn and Dennis Blum
(Exhibit 10.19)(3)
10.19 Noncompetition Agreements dated April 1, 1993 with Charles G. Welle and Richard C. Frost
related to the purchase of assets of Computer Renaissance (Exhibit 10.20)(3)
10.20 Separation Agreement and Release - Robert E. Thiner (Exhibit 10.20)(4)(5)
10.21 Separation Agreement and Release - Steven A. Gemlo (Exhibit 10.21)(4)(5)
10.22 Revolving Credit Agreement with TCF Bank FSB, dated July 31, 1996 (Exhibit 10.22)
10.23 Revolving Promissory Note with TCF Bank FSB, dated July 31, 1996 (Exhibit 10.23)
11.1 Statement of Computation of Per Share Earnings
23.1 Consent of Arthur Andersen LLP Independent Public Accountants
27.1 Financial Data Schedule
99.1 Cautionary Statements
(1) Incorporated by reference to the specified exhibit to
the Registration Statement on Form S-1, effective
August 24, 1993 (Reg. No. 33-65108).
(2) Incorporated by reference to the specified exhibit to
the Annual Report on Form 10-K for the fiscal year
ended December 30, 1995.
(3) Incorporated by reference to the specified exhibit to
the Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.
(4) Incorporated by reference to the specified exhibit to
the Quarterly Report on Form 10-Q for the quarter
ended September 28, 1996.
(5) Indicates management contracts, compensation plans or
arrangements required to be filed as exhibits.
(b.) Reports on Form 8-K No reports on Form 8-K were filed by the
Registrant during the fiscal quarter
ended December 28, 1996.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Grow Biz International, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in this Form 10-K and have issued our report
thereon dated February 4, 1997. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in Item
14(a)(2) is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
February 4, 1997
GROW BIZ INTERNATIONAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS/ WRITE-OFFS AT END
OF PERIOD EXPENSES OF PERIOD
1994
Accounts receivable reserves $ 375,400 $ 256,400 $ (146,500) $ 485,300
============ ============ ========== ===========
1995
Accounts receivable reserves $ 485,300 $ 324,242 $ (179,570) $ 630,000
============ ============ ========== ===========
1996
Accounts receivable reserves $ 630,000 $ 681,000 $ (381,000) $ 930,000
============ ============ ========== ===========
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS/ WRITE-OFFS AT END
OF PERIOD EXPENSES OF PERIOD
1994
Inventory reserves $ 0 $ 0 $ (0) $ 0
========= ========= ========= =========
1995
Inventory reserves $ 0 $ 773,500 $(447,100) $ 326,400
========= ========= ========= =========
1996
Inventory reserves $ 326,400 $ 436,600 $(669,000) $ 94,000
========= ========= ========= =========
SIGNATURES
In accordance with Section 13 or 15(d) 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.
GROW BIZ INTERNATIONAL, INC.
By: /s/ RONALD G. OLSON Date: March 19, 1997
Ronald G. Olson
President and Chief Executive Officer
KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints K. Jeffrey Dahlberg, Ronald G. Olson and David J.
Osdoba, Jr., and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any amendments to this Form
10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ K. JEFFREY DAHLBERG Chairman of the Board of Directors March 18, 1997
- ------------------------------------------------
K. Jeffrey Dahlberg
President, Chief Executive Officer
/s/ RONALD G. OLSON and Director March 19, 1997
- ------------------------------------------------ (principal executive officer)
Ronald G. Olson
Vice President of Finance and Chief Financial
/s/ DAVID J. OSDOBA, JR. Officer March 19, 1997
- ------------------------------------------------ (principal financial and accounting officer)
David J. Osdoba, Jr.
/s/ GAYLEN L. KNACK Vice President and General Counsel March 14, 1997
- ------------------------------------------------
Gaylen L. Knack
/s/ RANDEL S. CARLOCK Director March 11, 1997
- ------------------------------------------------
Randel S. Carlock
/s/ DENNIS J. DOYLE Director March 11, 1997
- ------------------------------------------------
Dennis J. Doyle
/s/ ROBERT C. POHLAD Director March 13, 1997
- ------------------------------------------------
Robert C. Pohlad
/s/ BRUCE C. SANBORN Director March 11, 1997
- ------------------------------------------------
Bruce C. Sanborn
/s/ ROBERT E. THINER Director March 11, 1997
- ------------------------------------------------
Robert E. Thiner