Play-It-Again Parent Posts Improved Q2 Bottom Line, Merch Sales Down

Winmark Corporation posted net income for the second quarter of $650,400, or 11 cents per share diluted, compared to net income of $542,600, or 8 cents per share diluted, in 2005. Net revenues from merchandise sales were down 53.9% to $790,000 from $1.7 million during the same quarter last year. For the six months ended July 1, 2006, net income was $1,763,700, or 29 cents per share diluted, compared to net income of $1,242,500, or 19 cents per share diluted, for the same period last year.

John L. Morgan, Chairman and Chief Executive Officer, stated, “During the second quarter the franchising business continued its modest growth and our leasing businesses added assets at an acceptable level. We launched a $50 million subordinated debt offering which, when combined with our bank line of credit and cash flow from operations will allow us to finance our growth for the foreseeable future.”

                             WINMARK CORPORATION
                      CONDENSED STATEMENTS OF OPERATIONS
                                 (Unaudited)

                               Quarter Ended           Six Months Ended
                            July 1,     June 25,      July 1,     June 25,
                             2006        2005          2006        2005
    REVENUE:
      Royalties           $4,476,700   $4,208,700   $9,520,500   $8,723,100
      Merchandise sales      790,000    1,712,000    2,080,700    3,947,600
      Franchise fees         460,700      225,000      675,700      415,000
      Leasing income         424,900       93,400      686,700      154,300
      Other                  121,000      124,700      283,000      268,500
        Total revenue      6,273,300    6,363,800   13,246,600   13,508,500
    COST OF MERCHANDISE
     SOLD                    757,600    1,400,300    1,996,700    3,320,300
    LEASING EXPENSE           42,900            -       46,700            -
    SELLING, GENERAL AND
     ADMINISTRATIVE
     EXPENSES              4,406,900    3,987,000    8,728,300    8,032,400
      Income from
       operations          1,065,900      976,500    2,474,900    2,155,800
    LOSS FROM EQUITY
     INVESTMENTS                   -      (89,200)           -     (183,300)
    GAIN (LOSS) ON SALE
     OF INVESTMENTS                -      (14,800)           -        6,500
    INTEREST EXPENSE        (121,400)           -     (121,400)           -
    INTEREST AND OTHER
     INCOME                  145,200       84,900      601,300      144,900
      Income before
       income taxes        1,089,700      957,400    2,954,800    2,123,900
    PROVISION FOR INCOME
     TAXES                  (439,300)    (414,800)  (1,191,100)    (881,400)
    NET INCOME              $650,400     $542,600   $1,763,700   $1,242,500
    EARNINGS PER SHARE
     - BASIC                    $.11         $.09         $.30         $.21
    WEIGHTED AVERAGE
     SHARES OUTSTANDING
     - BASIC               5,855,150    6,097,003    5,945,549    6,030,909
    EARNINGS PER SHARE
     - DILUTED                  $.11         $.08         $.29         $.19
    WEIGHTED AVERAGE
     SHARES OUTSTANDING
     - DILUTED             6,078,964    6,516,921    6,157,944    6,471,219