WINMARK CORPORATION_March 28, 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2026

☐

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: 000-22012

WINMARK CORPORATION

(Exact name of registrant as specified in its charter)


Minnesota		41-1622691
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

605 Highway 169 North, Suite 400, Minneapolis, MN 55441

(Address of principal executive offices) (Zip Code)

(763) 520-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, no par value per share	WINA	Nasdaq Global Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Non-accelerated filer ☐

Accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Common stock, no par value, 3,577,671 shares outstanding as of April 13, 2026.

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WINMARK CORPORATION AND SUBSIDIARIES

INDEX

		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	CONSOLIDATED CONDENSED BALANCE SHEETS:
	March 28, 2026 and December 27, 2025	3

	CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS:
	Three Months Ended March 28, 2026 and March 29, 2025	4

	CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT):
	Three Months Ended March 28, 2026 and March 29, 2025	5

	CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS:
	Three Months Ended March 28, 2026 and March 29, 2025	6

	NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS	7 - 11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11 - 14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14 - 15

Item 4.	Controls and Procedures	15

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	15

Item 1A.	Risk Factors	15 - 16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	17

Item 4.	Mine Safety Disclosures	17

Item 5.	Other Information	17

Item 6.	Exhibits	17

	SIGNATURES	18

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PART I. FINANCIAL INFORMATION

ITEM 1: Financial Statements

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


		March 28, 2026			December 27, 2025
ASSETS
Current Assets:
Cash and cash equivalents		$	19,828,300		$	10,295,700
Restricted cash			100,000			165,000
Receivables, less allowance for credit losses of $500 and $500			2,002,500			1,483,500
Income tax receivable			—			463,600
Inventories			421,400			362,500
Prepaid expenses			2,698,800			1,325,700
Total current assets			25,051,000			14,096,000
Property and equipment, net			1,138,400			1,219,000
Operating lease right of use asset			1,670,700			1,761,500
Intangible assets, net			2,197,800			2,286,300
Goodwill			607,500			607,500
Other assets			525,400			506,400
Deferred income taxes			4,407,400			4,407,400
		$	35,598,200		$	24,884,100

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	1,057,500		$	1,673,900
Income tax payable			1,919,100			—
Accrued liabilities			4,496,800			2,324,800
Deferred revenue			1,654,700			1,667,300
Total current liabilities			9,128,100			5,666,000
Long-term Liabilities:
Line of credit/Term loan			30,000,000			30,000,000
Notes payable, net of unamortized debt issuance costs of $34,400 and $39,000			29,965,600			29,961,000
Deferred revenue			8,307,000			8,350,100
Operating lease liabilities			2,235,800			2,414,200
Other liabilities			2,170,400			2,175,200
Total long-term liabilities			72,678,800			72,900,500
Shareholders’ Equity (Deficit):
Common stock, no par value, 10,000,000 shares authorized, 3,577,671 and 3,571,861 shares issued and outstanding			21,260,800			19,612,800
Retained earnings (accumulated deficit)			(67,469,500)			(73,295,200)
Total shareholders' equity (deficit)			(46,208,700)			(53,682,400)
		$	35,598,200		$	24,884,100

The accompanying notes are an integral part of these financial statements

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WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended
		March 28, 2026			March 29, 2025
Revenue:
Royalties		$	19,262,800		$	17,774,700
Leasing income			—			2,307,800
Merchandise sales			653,900			941,300
Franchise fees			342,900			332,100
Other			590,100			563,800
Total revenue			20,849,700			21,919,700
Cost of merchandise sold			618,500			888,300
Selling, general and administrative expenses			7,869,600			7,434,800
Income from operations			12,361,600			13,596,600
Interest expense			(613,900)			(613,900)
Interest and other income			118,700			149,900
Income before income taxes			11,866,400			13,132,600
Provision for income taxes			(2,611,700)			(3,176,200)
Net income		$	9,254,700		$	9,956,400
Earnings per share - basic		$	2.59		$	2.81
Earnings per share - diluted		$	2.50		$	2.71
Weighted average shares outstanding - basic			3,573,767			3,538,647
Weighted average shares outstanding - diluted			3,708,538			3,672,943

The accompanying notes are an integral part of these financial statements.

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WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)


							Retained
							Earnings
		Common Stock					(Accumulated
		Shares		Amount			Deficit)			Total
BALANCE, December 27, 2025		3,571,861		$	19,612,800		$	(73,295,200)		$	(53,682,400)
Stock options exercised		5,810			1,033,900			—			1,033,900
Compensation expense relating to stock options		—			614,100			—			614,100
Cash dividends ($0.96 per share)		—			—			(3,429,000)			(3,429,000)
Comprehensive income (Net income)		—			—			9,254,700			9,254,700
BALANCE, March 28, 2026		3,577,671			21,260,800			(67,469,500)			(46,208,700)


							Retained
							Earnings
		Common Stock					(Accumulated
		Shares		Amount			Deficit)			Total
BALANCE, December 28, 2024		3,539,744		$	14,790,500		$	(65,836,600)		$	(51,046,100)
Repurchase of common stock		(7,383)			(2,249,900)			—			(2,249,900)
Stock options exercised		210			47,700			—			47,700
Compensation expense relating to stock options		—			536,600			—			536,600
Cash dividends ($0.90 per share)		—			—			(3,186,000)			(3,186,000)
Comprehensive income (Net income)		—			—			9,956,400			9,956,400
BALANCE, March 29, 2025		3,532,571			13,124,900			(59,066,200)			(45,941,300)

The accompanying notes are an integral part of these financial statements.

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WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended
		March 28, 2026			March 29, 2025
OPERATING ACTIVITIES:
Net income		$	9,254,700		$	9,956,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment			95,200			97,200
Amortization of intangible assets			88,500			88,500
Compensation expense related to stock options			614,100			536,600
Operating lease right of use asset amortization			90,800			82,200
Tax benefits on exercised stock options			302,800			—
Change in operating assets and liabilities:
Receivables			(519,000)			(1,250,000)
Income tax receivable/payable			2,079,900			2,980,000
Inventories			(58,900)			59,400
Prepaid expenses			(1,373,100)			323,700
Other assets			(19,000)			(25,200)
Accounts payable			(616,400)			(18,000)
Accrued and other liabilities			1,993,500			2,018,300
Deferred revenue			(55,800)			229,300
Net cash provided by operating activities			11,877,300			15,078,400
INVESTING ACTIVITIES:
Purchase of property and equipment			(14,600)			(51,200)
Net cash used for investing activities			(14,600)			(51,200)
FINANCING ACTIVITIES:
Repurchases of common stock			—			(2,249,900)
Proceeds from exercises of stock options			1,033,900			47,700
Dividends paid			(3,429,000)			(3,186,000)
Net cash used for financing activities			(2,395,100)			(5,388,200)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			9,467,600			9,639,000
Cash, cash equivalents and restricted cash, beginning of period			10,460,700			12,329,800
Cash, cash equivalents and restricted cash, end of period		$	19,928,300		$	21,968,800
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	604,000		$	604,000
Cash paid for income taxes		$	207,600		$	196,200

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Condensed Balance Sheets to the total of the same amounts shown above:
		Three Months Ended
		March 28, 2026			March 29, 2025
Cash and cash equivalents		$	19,828,300		$	21,828,800
Restricted cash			100,000			140,000
Total cash, cash equivalents and restricted cash		$	19,928,300		$	21,968,800

The accompanying notes are an integral part of these financial statements.

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WINMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Management’s Interim Financial Statement Representation:

The accompanying consolidated condensed financial statements have been prepared by Winmark Corporation and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has a 52/53 week year which ends on the last Saturday in December. The information in the consolidated condensed financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated condensed financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q, and therefore do not contain certain information included in the Company’s annual consolidated financial statements and notes. This report should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

Revenues and operating results for the three months ended March 28, 2026 are not necessarily indicative of the results to be expected for the full year.

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported.

Recently Issued Accounting Pronouncements

Disaggregation – Income Statement Expenses – In November 2024, the Financial Accounting Standards Board (“FASB”) issued guidance requiring additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as disclosures about selling expenses. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

2. Organization and Business:

The Company offers licenses to operate franchises using the service marks Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. Historically, the Company also operated a middle market equipment leasing business under the Winmark Capital® mark.

3. Contract Liabilities:

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees. The table below presents the activity of the current and noncurrent deferred franchise revenue during the first three months of 2026 and 2025, respectively:


		March 28, 2026			March 29, 2025
Balance at beginning of period		$	10,017,400		$	9,687,300
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period			395,400			617,100
Fees earned that were included in the balance at the beginning of the period			(451,100)			(387,800)
Balance at end of period		$	9,961,700		$	9,916,600

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The following table illustrates future estimated revenue to be recognized for the remainder of 2026 and full fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 28, 2026.


Contract Liabilities expected to be recognized in	Amount
2026	$	1,305,900
2027		1,527,900
2028		1,358,500
2029		1,210,100
2030		1,096,500
Thereafter		3,462,800
	$	9,961,700

4. Fair Value Measurements:

The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses three levels of inputs to measure fair value:

●

Level 1 – quoted prices in active markets for identical assets and liabilities.

●

Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities.

●

Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value.

5. Leasing Operations:

In May 2021, the Company made the decision to no longer solicit new leasing customers and pursue an orderly run-off for its leasing portfolio. As of December 27, 2025, the run-off of the portfolio was completed and the Company no longer has any leasing customers or leased assets.

Leasing income as presented on the Consolidated Condensed Statements of Operations consists of the following:


		Three Months Ended			Three Months Ended
		March 28, 2026			March 29, 2025
Operating lease income			—			46,600
Income on sales of equipment under lease			—			200,000
Other			—			2,061,200
Leasing income		$	—		$	2,307,800

6. Intangible Assets

Intangible assets consist of reacquired franchise rights. The Company amortizes the fair value of the reacquired franchise rights over the contract term of the franchise. The Company recognized $88,500 and $88,500 of amortization expense for the three months ended March 28, 2026 and March 29, 2025, respectively.

The following table illustrates future amortization to be expensed for the remainder of 2026 and full fiscal years thereafter related to reacquired franchise rights as of March 28, 2026.


Amortization expected to be expensed in	Amount
2026	$	265,500
2027		354,000
2028		354,000
2029		354,000
2030		354,000
Thereafter		516,300
	$	2,197,800

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7. Earnings Per Share:

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”):


		Three Months Ended
		March 28, 2026		March 29, 2025
Denominator for basic EPS — weighted average common shares		3,573,767		3,538,647
Dilutive shares associated with option plans		134,771		134,296
Denominator for diluted EPS — weighted average common shares and dilutive potential common shares		3,708,538		3,672,943
Options excluded from EPS calculation — anti-dilutive		7,327		8,382

8. Shareholders’ Equity (Deficit):

Dividends

On January 28, 2026, the Company’s Board of Directors approved the payment of a $0.96 per share quarterly cash dividend to shareholders of record at the close of business on February 11, 2026, which was paid on March 2, 2026.

Repurchase of Common Stock

During the first three months of 2026, the Company did not repurchase shares of its common stock. Under the Board of Directors’ authorization, as of March 28, 2026, the Company has the ability to repurchase an additional 70,656 shares of its common stock. Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing.

Stock Option Plans and Stock-Based Compensation

Stock option activity under the Company’s option plans as of March 28, 2026 was as follows:


							Weighted Average
							Remaining
		Number of		Weighted Average			Contractual Life
		Shares		Exercise Price			(years)			Intrinsic Value
Outstanding, December 27, 2025		315,002		$	238.30
Exercised		(5,810)			177.95
Outstanding, March 28, 2026		309,192		$	239.45		5.46		$	55,732,700
Exercisable, March 28, 2026		231,283		$	198.22		4.48		$	50,749,500

No options were granted during the first three months ended March 28, 2026 or the three months ended March 29, 2025. All unexercised options at March 28, 2026 have an exercise price equal to the fair market value on the date of the grant.

Compensation expense of $614,100 and $536,600 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in the first three months of 2026 and 2025, respectively. As of March 28, 2026, the Company had $5.6 million of total unrecognized compensation expense related to stock options that is expected to be recognized over the remaining weighted average vesting period of approximately 3.0 years.

9. Debt:

Line of Credit/Term Loan

As of March 28, 2026, there were no revolving loans outstanding under the Company’s credit facility with CIBC Bank USA (the “Line of Credit”), leaving $20.0 million available for additional borrowings. As of March 28, 2026, the Company had delayed draw term loan borrowings totaling $30.0 million under the Line of Credit bearing interest ranging from 4.60% to 4.75%.

The Line of Credit has been and will continue to be used for general corporate purposes. The Line of Credit is secured by a lien against substantially all of the Company’s assets, (as the Line of Credit ranks pari passu with the Prudential facilities described below) contains customary financial conditions and covenants, and requires maintenance of

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minimum levels of debt service coverage and maximum levels of leverage (all as defined within the Line of Credit). As of March 28, 2026, the Company was in compliance with all of its financial covenants.

Notes Payable

As of March 28, 2026, the Company had aggregate principal outstanding of $30.0 million under its Note Agreement (“the Note Agreement”) with PGIM, Inc. (formerly Prudential Investment Management, Inc.) its affiliates and managed accounts (collectively, “Prudential”) consisting of $30.0 million in principal outstanding from the $30.0 million Series C notes issued in September 2021.

The final maturity of the Series C notes is 7 years from the issuance date. For the Series C notes, interest at a rate of 3.18% per annum on the outstanding principal balance is payable quarterly until the principal is paid in full. The Series C notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1.0 million), but prepayments require payment of a Yield Maintenance Amount, as defined in the Note Agreement.

The Company’s obligations under the Note Agreement are secured by a lien against substantially all of the Company’s assets (as the notes rank pari passu with the Line of Credit), and the Note Agreement contains customary financial conditions and covenants, and requires maintenance of minimum levels of debt service coverage and maximum levels of leverage (all as defined within the Note Agreement). As of March 28, 2026, the Company was in compliance with all of its financial covenants.

In connection with the Note Agreement, the Company incurred debt issuance costs, of which unamortized amounts are presented as a direct deduction from the carrying amount of the related liability.

10. Operating Leases:

As of March 28, 2026, the Company leases its Minnesota corporate headquarters in a facility with an operating lease that expires in December 2029. The remaining lease term for this lease is 3.75 years and the discount rate is 5.5%. The Company recognized $288,900 and $275,600 of operating lease costs for the periods ended March 28, 2026 and March 29, 2025, respectively.

Maturities of operating lease liabilities is as follows for the remainder of fiscal 2026 and full fiscal years thereafter as of March 28, 2026:


Operating Lease Liabilities expected to be recognized in		Amount
2026		$	623,000
2027			851,100
2028			874,600
2029			898,700
2030			—
Thereafter			—
Total lease payments			3,247,400
Less imputed interest			(317,900)
Present value of lease liabilities		$	2,929,500

Of the $2.9 million operating lease liability outstanding at March 28, 2026, $0.7 million is included in Accrued liabilities in the Current liabilities section of the Consolidated Condensed Balance Sheets.

Supplemental cash flow information related to our operating leases is as follows for the period ended March 28, 2026:


		Three Months Ended
		March 28, 2026			March 29, 2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow outflow from operating leases		$	205,200		$	199,600

11. Segment Reporting:

The Company currently has one reportable business segment, franchising, and one non-reportable operating segment. The franchising segment franchises value-oriented retail store concepts that buy, sell and trade merchandise. The non-reportable operating segment includes the Company’s equipment leasing business. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer. The Company’s CODM primarily reviews revenue and income from operations for purposes of allocating resources and evaluating financial performance. Expenses are

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reviewed on a consolidated basis. The Company’s internal management reporting is the basis for the information disclosed for its operating segments. The following tables summarize financial information by segment and provide a reconciliation of segment contribution to income from operations:


		Three Months Ended
		March 28, 2026			March 29, 2025
Revenue:
Franchising		$	20,849,700		$	19,611,900
Other			—			2,307,800
Total revenue		$	20,849,700		$	21,919,700

Franchising segment operating expenses:
Merchandise COGS		$	618,500		$	888,300
Selling, general and administrative expenses			7,869,600			7,351,300
Total franchising segment expenses		$	8,488,100		$	8,239,600

Reconciliation to operating income:
Franchising segment income from operations		$	12,361,600		$	11,372,300
Other operating segment income from operations			—			2,224,300
Total income from operations		$	12,361,600		$	13,596,600

Depreciation and amortization:
Franchising		$	183,700		$	185,700
Other			—			—
Total depreciation and amortization		$	183,700		$	185,700

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Winmark - the Resale Company is focused on sustainability and small business formation. As of March 28, 2026, we had 1,383 franchises operating under the Plato’s Closet, Once Upon A Child, Play It Again Sports, Style Encore and Music Go Round brands. Our business is not capital intensive and is designed to generate consistent, recurring revenue and strong operating margins.

The financial criteria that management closely tracks to evaluate current business operations and future prospects include royalties and selling, general and administrative expenses.

Our most significant source of revenue is royalties received from our franchisees. During the first three months of 2026, our royalties increased $1.5 million or 8.4% compared to the first three months of 2025.

Management continually monitors the level and timing of selling, general and administrative expenses. The major components of selling, general and administrative expenses include compensation and benefits, marketing and advertising, professional services, and occupancy. During the first three months of 2026, selling, general and administrative expenses increased $0.4 million, or 5.8% compared to the first three months of 2025.

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Management also monitors several nonfinancial factors in evaluating the current business operations and future prospects including franchise openings and closings and franchise renewals. The following is a summary of our net store growth and renewal activity for the first three months ended March 28, 2026:

AVAILABLE

TOTAL

FOR

COMPLETED

 

12/27/2025

 

OPENED

 

CLOSED

 

3/28/2026

 

RENEWAL

 

RENEWALS

 

% RENEWED

Plato’s Closet

526

(1)

528

SEC Form 10-Q filed by Winmark Corporation