8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  July 20, 2006

Winmark Corporation

(Exact Name of Registrant as Specified in Its Charter)

Minnesota

(State or Other Jurisdiction of Incorporation)

000-22012	41-1622691
(Commission File Number)	(I.R.S. Employer Identification Number)

4200 Dahlberg Drive, Suite 100 Golden Valley, MN 55422-4837

(Address of Principal Executive Offices)  (Zip Code)

(612) 520-8500

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.Results of Operations and Financial Conditions

On July 20, 2006, the Company announced in a press release its results of operations and financial condition for the second quarter ended July 1, 2006. A copy of the press release is attached as Exhibit 99.1 of this Current Report on Form 8-K.

Item 9.01.Financial Statements, Pro Forma Financial Information and Exhibits.

(c)Exhibits

99.1Press Release dated July 20, 2006

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

WINMARK CORPORATION

	WINMARK CORPORATION
Date: July 20, 2006	By:	/s/	Catherine P.Heaven
			Catherine P. Heaven
			General Counsel

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EXHIBIT INDEX

to

Form 8-K

Winmark Corporation

Exhibit Number	Exhibit Description
99.1	Press Release dated July 20, 2006

4

EX-99.1

Exhibit 99.1

Contact:	John L. Morgan
	763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES

SECOND QUARTER RESULTS

Minneapolis, MN (July 20, 2006)  -  Winmark Corporation (Nasdaq; WINA) announced today net income for the quarter ended July 1, 2006 of $650,400, or $.11 per share diluted, compared to net income of $542,600, or $.08 per share diluted, in 2005.  For the six months ended July 1, 2006, net income was $1,763,700, or $.29 per share diluted, compared to net income of $1,242,500, or $.19 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 provides financial services and develops franchises for retail stores that buy, sell, trade and consign used and new merchandise.  At July 1, 2006, there were 819 franchise stores in operation under the Company’s brands and an additional 44 franchises awarded but not open.  Of the stores in operation, there were 394 Play It Again Sports®, 208 Once Upon A Child®, 171 Plato’s Closet®, 41 Music Go Round® and 5 Wirth Business Credit® franchises.  In addition, at July 1, 2006, the Company had an equipment leasing portfolio equal to $13.3 million.

This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), relating to future events or the future financial performance of the Company including statements with respect to our ability to finance the growth of our leasing and franchising businesses for the foreseeable future.  Such forward-looking statements are only predictions or statements of intention subject to risks and uncertainties and actual events or results could differ materially from those anticipated.  Because actual result may differ, shareholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

WINMARK CORPORATION

CONDENSED BALANCE SHEETS

(unaudited)

	July 1, 2006		December 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents	$	1,343,200	$	2,947,700
Receivables, less allowance for doubtful accounts of $40,900 and $188,700	2,071,500		1,836,300
Investment in direct finance leases	3,234,700		1,478,200
Income tax receivable	548,500		620,500
Inventories	74,000		67,000
Prepaid expenses	1,146,400		804,000
Deferred income taxes	776,800		776,800
Total current assets	9,195,100		8,530,500
Long-term investment in leasing operations	10,077,800		5,492,400
Long-term investments	11,500,000		11,000,000
Long-term receivables, net	77,800		94,300
Property and equipment, net	529,000		448,600
Other assets, net	607,500		607,500
Deferred income taxes	375,400		375,400
	$	32,362,600	$	26,548,700
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of Credit	$	11,000,000	$	—
Accounts payable	581,500		1,156,400
Accrued liabilities	1,698,900		1,435,900
Current discounted lease rentals	151,900		147,600
Rents received in advance	293,600		167,600
Current deferred revenue	856,000		829,100
Total current liabilities	14,581,900		3,736,600
Long-term renewable subordinated notes	3,720,000		—
Long-term discounted lease rentals	121,000		185,600
Long-term deferred revenue	392,300		339,600
Shareholder’s Equity:
Common stock, no par, 10,000,000 shares authorized, 5,632,042 and 6,049,037 shares issued and outstanding	—		3,840,500
Retained earnings	13,547,400		18,446,400
Total shareholders’ equity	13,547,400		22,286,900
	$	32,362,600	$	26,548,700

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Quarter Ended						Six Months Ended
	July 1, 2006			June 25, 2005			July 1, 2006			June 25, 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