<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

   /X/   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 1998



   / /   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: 000-9812

                        GREASE MONKEY HOLDING CORPORATION
                        ---------------------------------
                         (Name of small business issuer
                                 in its charter)

                     Utah                              87-0321320
        -----------------------------             --------------------
        (State or other jurisdiction                (I.R.S. Employer
     of incorporation or organization)              Identification No.)

         633 17th Street, Suite 400
                Denver, Colorado                           80202
              --------------------                         -----
    (Address of principal executive offices)             (Zip Code)

                    Issuer's telephone number: (303) 308-1660

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

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

                          $0.03 Par Value Common Stock
                          ----------------------------
                                (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the past 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 / /

     Check if disclosure of delinquent filers in response to Item 405 of 
Regulation S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.                           [ ]

     The issuer's revenue for its most recent fiscal year was:   $20,101,585

     The aggregate market value of the issuer's voting stock held as of February
26, 1999, by nonaffiliates of the issuer was $2,651,888.

     As of February 26, 1999, the issuer had 4,647,880 shares of its $0.03 par
value common stock outstanding.

     Transitional Small Business Disclosure Format.     Yes / /      No /X/

<PAGE>

                       GREASE MONKEY HOLDING CORPORATION

                           Annual Report on Form 10-KSB

                                December 31, 1998

                                 Table of Contents

<TABLE>
<CAPTION>

                                      PART I                               PAGE
                                      ------                               ----
<S>                                                                       <C>
Item   1    -   Description of Business....................................   1

Item   2    -   Description of Property....................................   6

Item   3    -   Legal Proceedings..........................................   7

Item   4    -   Submission of Matters to a Vote of Security Holders........   7


                                        PART II
                                        -------

Item   5    -   Market for Common Equity and Related
                Stockholder Matters........................................   8

Item   6    -   Management's Discussion and Analysis or Plan
                of Operation ..............................................   9

Item   7    -   Financial Statements ......................................  23

Item   8    -   Changes In and Disagreements With Accountants
                on Accounting and Financial Disclosure.....................  23


                                        PART III
                                        --------

Item   9    -   Directors, Executive Officers, Promoters and
                Control Persons, Compliance with
                Section 16(a) of the Exchange Act..........................  24

Item   10   -   Executive Compensation.....................................  28

Item   11   -   Security Ownership of Certain Beneficial Owners and
                Management.................................................  32

Item   12   -   Certain Relationships and Related Transactions.............  33

Item   13   -   Exhibits and Reports on Form 8-K...........................  36

</TABLE>

                                         ii

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         Grease Monkey Holding Corporation ("GMHC") or ("the Company") is a 
Utah corporation formed in 1976 that is engaged in the business of owning, 
operating, leasing, managing and franchising automotive fast service 
lubrication and oil change centers under the trade name of Grease Monkey 
("Grease Monkey Centers" or "Centers").

         THE CONCEPT. Grease Monkey Centers provide the automobile user with 
convenient preventative fluid maintenance services. In about ten minutes, 
without an appointment, Grease Monkey service technicians change the oil, 
install a new oil filter, lubricate the chassis, adjust tire pressure, wash 
windows and vacuum the interior of an automobile. At the same time, all fluid 
levels are checked and topped off, if necessary. The price for this basic 
service is $23.99 to $32.99 in the United States ($11.65 to $19.50 in 
Mexico), depending upon the location of the Center. Grease Monkey Centers 
also offer transmission fluid changes, differential fluid changes, radiator 
flushes, air conditioning recharges, automotive light bulb replacement, an 
oil additive package, and will replace air filters and install new wiper 
blades.

         Grease Monkey Centers are two or three bay drive-through buildings 
built to the Company's specifications. Grease Monkey buildings utilize 
service basements from which the underneath portion of the vehicle is 
serviced at the same time other technicians service the vehicle from above. 
The buildings also include a pleasant customer waiting area.

         COMPANY-OWNED CENTERS. As of January 31, 1999, the Company owned and 
operated a total of 31 Grease Monkey Centers and owned an additional two 
Centers which are operated by a third party under a Management Agreement. The 
Grease Monkey Centers owned by the Company were either opened by the Company 
(4), acquired from franchisees through purchase (19), acquired as a result of 
the Company's exercise of its right of first refusal (1), or taken over from 
failed franchisees (9). The Company believes the operation of Company-owned 
Centers is important to its overall success and expects to continue to 
purchase and develop Company-owned Centers.

         THE FRANCHISE. The Company licenses franchisees to operate Grease 
Monkey Centers pursuant to a franchise agreement. A franchisee is required to 
pay a franchise fee totaling $28,000 for the initial license and $16,800 for 
each additional license. If three or more licenses are purchased 
concurrently, an Exclusive Territory Development Agreement ("ETD Agreement") 
may be executed. When an ETD Agreement is executed, the franchisee pays a 
development fee equal to $28,000 for the first Center to be developed and 
$8,400 for the second and each subsequent Center to be developed. The 
development fee is nonrefundable. The initial franchise fee of $28,000 is 
charged for the first franchise and $16,800 for the second and each 
subsequent franchise acquired under the ETD Agreement. The portion of the 
development fee paid for each Center to be developed is applied toward the 
initial franchise fee for that franchise. The Company also offers to select 
qualified persons the opportunity to acquire a larger nonexclusive area 
("Development Area") than under the ETD Agreement. If a Development Area is 

                                      1

<PAGE>

purchased, an Area Development Agreement ("AD Agreement") is executed. When 
an AD Agreement is executed, the franchisee pays an area development fee 
equal to $5,000 times the estimated number of franchises which may be 
established in the Development Area. The initial franchise fee of $28,000 is 
charged for the first franchise and $16,800 for the second and each 
subsequent franchise acquired under the AD Agreement.


                                        2

<PAGE>

         CENTERS. On January 31, 1999, the Company had a total of 216 Grease 
Monkey Centers open. The following table provides certain information 
pertaining to Grease Monkey Centers as of January 31, 1999:

<TABLE>
<CAPTION>

                                                                                      Centers Open
                            Franchise                                     ----------------------------------
                            Applicants         Franchises Sold (1)        Franchised   Company-Owned   Total
                            ==========         ===================        ==================================
<S>                         <C>                <C>                        <C>          <C>             <C>
 Arizona                         1                      5                    5                          5
 California                                             13                  11             2            13
 Colorado                        3                      40                  33             20           53
 Florida                                                3                    3                          3
 Georgia                                                1                    1                          1
 Idaho                                                  3                    3                          3
 Illinois                                               1                    1                          1
 Indiana                                                10                  10             1            11
 Iowa                                                   7                    6                          6
 Kansas                                                 5                    5                          5
 Kentucky                                               1                    1                          1
 Maryland                                               5                    4                          4
 Missouri                        4                      4                    3                          3
 Montana                                                1                    1                          1
 Nebraska                                               2                    2                          2
 New Jersey                                             9                    8                          8
 New Mexico                                             1                    1                          1
 New York                                               2                    1                          1
 North Carolina                                         8                    7                          7
 North Dakota                                           1                    1                          1
 Ohio                                                   12                   9                          9
 Pennsylvania                                           10                   9                          9
 Rhode Island                                                                              1            1
 South Carolina                                         11                  11                          11
 Tennessee                                              1
 Texas                                                  3                    3             1            4
 Virginia                                               8                    8                          8
 Washington                                             5                    5             8            13
 West Virginia                                          4                    3                          3
 Wyoming                                                2                    2                          2
 Mexico                          1                      31                   26                         26
                               -----                  -----                -----         -----        -----
 TOTALS:                         9                     209                  183            33          216
                               =====                  =====                =====         =====        =====
</TABLE>

(1) Does not include those Centers operated by the Company.

         During 1998, eight franchise licenses were sold and sixteen 
franchised Grease Monkey Centers were opened. In 1998, ten franchise 
agreements were terminated for non-performance, three franchise agreements 
were canceled concurrently with the Company taking over the 

                                       3

<PAGE>

operations of the Centers, and eight franchises of open Grease Monkey Centers 
were terminated, in accordance with the franchise agreement when the Centers 
were closed or sold.

         PATENTS, TRADEMARKS AND LICENSES.  The Company owns no patents or 
concessions.  As described above, the sale of franchises is materially 
important to the operations and growth of the Company.

         The Company is the owner of, and has registered with the United 
States Patent and Trademark Office on the Principal Register, the following 
trademarks and service marks: "GREASE MONKEY", "GREASE MONKEY, THE 10 MINUTE 
LUBE PROS" (including variations thereof), "MONKEY TALK", "SEYMORE MILES" and 
"MONKEY SHINE", as well as various designs and logotypes associated with and 
used in connection therewith. The trademark and service mark registrations 
expire between 2001 and 2009 and may be renewed for successive periods of 10 
years. The Company intends to maintain the above stated registrations in the 
manner required by applicable statute, namely, the Trademark Act of 1946, as 
amended.

         The mark, "GREASE MONKEY, 10 MINUTE LUBE & OIL PROS" and Design, was 
registered in the State of Colorado and is effective until November of 2004. 
The mark "GREASE MONKEY, THE TEN MINUTE LUBE PROS" was registered in the 
State of Colorado and is effective to March 2009.

         The Company has also registered its mark "GREASE MONKEY, THE 10 
MINUTE LUBE PROS" and Design with the Canadian Register of Trademarks, its 
mark "GREASE MONKEY" and Design with the Mexico Register of Trademarks and 
the Trinidad and Tobago Register of Trademarks, and the monkey design with 
the United Kingdom Register of Trademarks. These foreign registrations expire 
between 1999 and 2007 and may be renewed for successive periods.

         COMPETITION. The Company experiences competition for customers at the
retail level and also experiences competition from other fast lube operators for
franchisees and sites for Centers.

         At the retail level, the Centers experience competition from 
automobile dealers, independent mechanic shops, other fast lube operations, 
department store auto centers, and full service gas stations. The largest 
source of competition, however, may be the do-it-yourself market.

         The Company believes that the Grease Monkey Centers comprise the 4th 
largest fast lube chain with 216 Grease Monkey Centers operating at February 
28, 1999. The largest chain is Jiffy Lube International, Inc., owned by 
Pennzoil, which has 1,588 centers open, followed by Quaker State Minit-Lube, 
Inc. (also d/b/a Q Lube), owned by Quaker State Oil Company with 585 centers 
open. Ashland Oil Co. (d/b/a Rapid Oil Co. or Valvoline Instant Oil Change) 
follows with 581 open centers.

                                      4

<PAGE>

         The Company recognizes that the barriers to enter the fast 
lubrication business are significant, and in the future the Company may 
experience additional direct competition from other companies with greater 
strength and financial resources than those of the Company.

         ENVIRONMENTAL REGULATIONS. The Company and its franchisees are 
subject to various federal, state, and local provisions regarding the storage 
and disposal of waste materials, including the collection and disposal of 
used lubricating oils and other automotive fluids and waste oil filters. Each 
Grease Monkey Center is equipped with facilities for the collection of waste 
materials that comply with all applicable laws and regulations. Waste 
materials are disposed of with fully qualified and licensed collection 
services. Some used oil and used filters are sold to recyclers. Compliance 
with current and anticipated future federal, state and local requirements 
regarding the collection and disposal of these materials and storage and 
transfer of used oil and used oil filters to recyclers is not expected to 
materially affect capital expenditures, earnings, or the competitive position 
of the Company.

         The Company (with respect to any Center it owns or operates) and its 
franchisees are subject to federal, state or local regulations regarding the 
design, construction, operation and closure of storage tanks, including 
regulations applicable to underground storage tanks ("UST's"). In those 
locales where required, the operator of a Center must register the number and 
location of UST's. The registration fee is not a significant capital 
expenditure and the registration requirement does not place the Company at a 
competitive disadvantage. In 1998, Federal regulations required UST's either 
be removed, equipped with leak monitoring devices or meet temporary closure 
requirements. Temporary closure requires that support of corrosion protection 
and release detection devices be maintained and that vent lines are left open 
and functioning and all other lines, pumps, manways, and ancillary equipment 
are capped and secure. Release detection is not required as long as the UST 
system is empty. The Company has complied with Federal regulations by 
installing leak monitoring devices on the underground storage tanks at two of 
its Centers, has removed underground storage tanks at four of its Centers, 
has above ground storage tanks at thirteen of its Centers and has met the 
requirements of temporary closure at fourteen of its Centers, including the 
removal of contents. Costs associated with the removal of the remaining UST's 
at Company-owned Centers and at franchised Centers which have UST's where the 
Company is on the lease is not expected to exceed $150,000.

         The regulations issued by the Environmental Protection Agency and 
the parallel state regulations require insurance or proof of the financial 
ability of the owner or operator of a UST to cover any damage caused by leaks 
from the UST. The fee will vary from state to state. However, all lubrication 
centers in the same state will be required to purchase the insurance and, 
therefore, this requirement should not place the Company or its franchisees 
at a competitive disadvantage, but may result in an increase in the cost of 
the service.

         Some states have passed regulations that designate used oil and oil 
filters and their contents as hazardous waste. Such regulations require the 
Center operator to first crush the filter and then dispose of it and the used 
oil through use of a regulated hazardous waste carrier. Other states are 
considering such regulations. These regulations are imposed on all fast lube 
operators 

                                     5

<PAGE>

and do not place the Company or its franchisees at a competitive 
disadvantage, but may result in an increase in the cost of the service.

         EMPLOYEES. At January 31, 1999, the Company had 28 full-time employees
at its corporate offices, 8 full-time employees at its field offices, and 240
full-time employees in its Company-owned Grease Monkey Centers for a total of
276 employees. From time to time the Company hires part-time employees at its
Company-owned Centers.

         POTENTIAL MERGER. On March 26, 1999, the Board of Directors of the 
Company entered into a merger agreement with QL 3000, Inc., a privately held 
company based in Jacksonville, Florida. The merger agreement provides that 
each shareholder of the Company will receive $1.00 for each share of the 
Company's common stock. Holders of the Company's preferred stock will receive 
the stated value of their preferred stock plus all accrued and unpaid 
dividends. QL 3000 must complete debt and equity financing to fund the merger 
consideration. The Company may terminate the Merger Agreement if QL 3000 has 
not received a commitment letter for the debt financing by May 25, 1999. In 
addition, completion of the merger is subject to regulatory and shareholder 
approvals.

ITEM 2.  DESCRIPTION OF PROPERTY

         At January 31, 1999, the Company owned the buildings, on leased 
land, at eight Grease Monkey Centers. Of the eight properties, one is leased 
to a franchisee, and seven are used for Company-owned Centers.

         In addition, the Company owned one developed parcel of real estate 
in St. Louis, Missouri, two parcels of developed real estate in metropolitan 
Denver, Colorado, and one parcel of developed real estate in Warwick, Rhode 
Island. The property in Missouri was sold on February 9, 1999, and the 
properties in Colorado and Rhode Island house Company-owned Centers. The 
Company also owns three undeveloped parcels of bare land, two in Colorado and 
one in Washington.

         The Company's offices and training facility are located at 633 17th 
Street, Suite 400, Denver, Colorado, 80202. The Company leases a total of 
17,907 rentable square feet, which includes offices and a training facility, 
pursuant to a lease from an unaffiliated entity. The lease expires on 
November 30, 2008. Rent is approximately $18,000 per month.

         The Company has guaranteed leases or leased and subleased real 
estate for franchised Grease Monkey Centers. The Company is directly liable 
on the leases at 22 locations if the franchisees or third parties do not make 
the lease payments. (See Note F to the Consolidated Financial Statements.)

                                      6

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         On December 15, 1998, a demand for arbitration was made against the
Company by Navfam, Inc. based upon the Company's alleged breach of a Software
License Agreement dated April 7, 1998. That matter is governed by the American
Arbitration Association in Los Angeles, California, and has been assigned Case
No. 72Y1140138198. Unspecified damages have been claimed by Navfam, Inc. in
excess of $250,000. In response to the arbitration demand, the Company has
specifically denied Navfam, Inc.'s claim.

         On September 16, 1998, a lawsuit was filed against the Company by
Barrett Commercial, Inc. in the United States District Court for the Central
District of California, BARRETT COMMERCIAL, INC. V. GREASE MONKEY INTERNATIONAL,
INC., No. SACV 98-1123GLT(EEx). In that action, Barrett alleges the existence of
a contract with the Company to work as development partners in Southern
California for the purpose of building ten stores. Barrett claims
unsubstantiated losses of $1,300,000 for expenditures made in pursuing that
development which was never completed. Barrett claims the Company is in breach
of the alleged agreement as a result of its refusal to reimburse it for those
alleged expenditures.

         The Company has generally denied those claims and believes and has 
asserted that they are frivolous and groundless. Barrett has been unable to 
produce the alleged contract and the Company believes none was ever created. 
In addition, the Company believes Barrett lacks any evidence to support his 
claim of the alleged expenditures pursuant to the Southern California 
development. The Company intends to defend vigorously said claims and its 
liability exposure at the present time appears to be nominal. We believe the 
likelihood of an unfavorable outcome in this matter is remote.

         The Company is involved in various other claims and legal action 
arising in the ordinary course of business. In the opinion of management, the 
ultimate disposition of these matters will not have a material adverse effect 
on the Company's consolidated financial position, results of operations or 
liquidity.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During the Company's fourth fiscal quarter of the year ended 
December 31, 1998, no matter was submitted to a vote of the Company's 
security holders, either by proxy solicitation or otherwise.

                                      7

<PAGE>

                                   PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (a)      MARKET INFORMATION.

         Since June 1998, the Company's common stock has traded on The OTC 
Bulletin Board under the symbol GMHC. Prior thereto, the Company's common 
stock was traded on The Nasdaq Small Cap Market tier of The Nasdaq Stock 
Market. The following table reports high, low and last sales prices of the 
common stock as reported by Nasdaq for the periods indicated:

<TABLE>
<CAPTION>

     Period          High Trade    Low Trade     Last Trade
================     ==========    ==========    ==========
<S>                  <C>           <C>           <C>
1997:
  First Quarter        $ 2.13        $ 1.63        $ 1.75
  Second Quarter       $ 2.06        $ 1.75        $ 1.75
  Third Quarter        $ 2.06        $ 1.63        $ 1.63
  Fourth Quarter       $ 1.44        $ 1.19        $ 1.19

1998:
  First Quarter        $ 1.27        $ 1.17        $ 1.17
  Second Quarter       $ 1.17        $ 1.02        $ 1.04
  Third Quarter        $ 0.90        $ 0.69        $ 0.73
  Fourth Quarter       $ 1.08        $ 0.60        $ 0.81
</TABLE>

         Prices represent quotations between dealers and do not include 
retail mark-ups, mark-downs, or commissions.

         (b)      HOLDERS.

                  As of February 26, 1999, the Company had 2,314 shareholders of
record.


         (c)      DIVIDENDS.

         To date, the Company has not paid any cash dividends on its common 
stock. Holders of the Company's common stock are entitled to receive 
dividends when and as declared by the Board of Directors out of funds legally 
available. All accrued and unpaid dividends on the Company's outstanding 
shares of Series C Preferred stock must be paid before dividends are paid on 
the Company's common stock. As of the date of filing of this Annual Report on 
Form 10-KSB, the Company is in arrears in the payment of dividends on the 
Series C Preferred Stock in the amount of approximately $665,000, which has 
not been recognized in the financial 

                                      8

<PAGE>

statements. Under Paragraph 5(d) of the Statement of Designation, Voting 
Powers, Preferences and Rights of the Series C Preferred Stock ("Statement of 
Designation"), if dividends on the Series C Preferred Stock are in arrears in 
an aggregate amount equal to at least four quarterly dividends, the number of 
members of the Board of Directors of the Company is automatically increased 
by the smallest number of directors that will constitute at least 25% of the 
Board of Directors after such increase and the holders of the Series C 
Preferred Stock (voting as a separate voting group) have the exclusive right 
to elect, remove or replace such additional directors of the Company. The 
holders of the Series C Preferred Stock have not notified the Company that 
they have any intention to elect or serve as Directors.

         As compensation for a guarantee of a standby letter of credit by 
Jerry D. Armstrong, James B. Wallace, Ray O. Brownlie and J.H. Bander in 
favor of the Company's landlord for its corporate office space, Messrs. 
Armstrong and Wallace, who are directors of the Company, and Messrs. Brownlie 
and Bander who are significant shareholders of the Company, were granted two 
year warrants to purchase 100,000 shares each of the Company's common stock 
for $1.05 per share. The warrants were issued in reliance upon the exemption 
from registration provided by Section 4(a) of the Securities Act of 1933, as 
amended. Such persons represented to the Company that they acquired the 
warrants for their own accounts and not with a view to distribution. Each 
person had available all material information concerning the Company. The 
certificates evidencing the warrants bear a restrictive legend under the 
Securities Act of 1933, as amended, and no underwriter was involved in the 
transaction.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

         The Company reported a net loss of $2,029,848 in 1998 compared to a net
loss of $1,158,586 in 1997 and a net loss of $577,123 in 1996.

         The net loss reported in 1998 is in part due to costs associated 
with the sale, disposition and closure of Centers of $444,725. In addition, 
general and administrative expenses included approximately $796,000 of 
non-recurring charges due to terminated projects, severance agreements and 
settlements. Royalty revenue and other revenue decreased $472,784 and 
$285,834, respectively, primarily due to settlement agreements entered into 
with former franchisees in 1997 resulting in approximately $207,000 in 
royalty revenue and approximately $283,000 in other revenue. Leasing revenue 
has declined $447,662 when compared with 1997, due in part to a former 
franchisee abandoning two sites in 1998. During a significant portion of 
1998, the Company was not receiving matching revenue for the expense outlay 
on these Centers. In addition, the Company acquired three franchised sites 
and was released from nine leases at franchised and third party locations, 
thus reducing not only rental income, but also the matching rent expense. On 
August 1, 1998, the Company entered into a Master Franchise 

                                      9

<PAGE>

Agreement for the Republic of Mexico. The Master Franchisee retains eighty 
percent of royalties and franchise fees collected from Mexico franchisees 
after the effective date of the agreement, which further reduces royalty 
revenue. Royalty revenue and product and equipment revenue in 1998 were also 
affected by the average number of franchises open and operating. The Company 
ended 1998 with a net decrease of five franchised Centers and an increase of 
two Company-owned Centers over 1997. During 1998, the Company terminated 18 
mature franchised Centers and replaced them with 16 new franchised Centers. 
This compares to the 15 new franchised Center openings in 1997 and 11 
franchised Center terminations in 1997. In 1998, the Company also opened two 
new Company-owned centers, reacquired three Centers from failed franchisees, 
sold one Center, and closed two Centers. Franchise sales were down in 1998 
with eight new franchise licenses sold compared to 14 sold in 1997.

         The net loss reported in 1997 is in part due to costs associated 
with: the sale, disposition and closure of Centers of approximately $368,000; 
the accrual of the Company's obligation under a Consultant Agreement with the 
Company's previous, now current, President of approximately $379,000; 
increases of approximately $435,000 in the general and administrative areas 
of salaries, wages and personnel expenses, professional fees, and 
Company-owned Center division overhead; and losses incurred and or accrued 
for settlements related to employment, real estate and environmental issues 
of approximately $176,000. These losses were offset by royalty revenue and 
other revenue recognized due to a settlement agreement entered into with a 
former franchisee of approximately $375,000. In addition, other income of 
approximately $118,000 was recognized based on settlements with two 
franchisees. 1997 ended with a net increase of three franchised Centers while 
the number of Company-owned Centers remained at 31 for both year ends. During 
1997, the Company opened 15 new franchised Centers and terminated 11 
franchised Centers. This compares to the 11 new franchised Center openings in 
1996 and 6 franchised Center terminations in 1996. In 1997, the Company also 
opened one new Company-owned Center, purchased three Centers from 
franchisees, sold two Centers and closed two Centers. Franchise sales were 
down in 1997 with 14 new franchise licenses sold compared to 27 sold in 1996.

         The net loss reported in 1996 is in part due to costs of $550,608 
related to litigation and terminated projects. Similar costs in 1995 were 
$106,176. 1996 ended with a net increase of three franchised Centers and two 
Company-owned Centers over 1995. During 1996, the Company opened 11 new 
franchised Centers and terminated six franchised Centers. This compares to 
the 18 new franchised Center openings in 1995 and 13 franchised center 
terminations in 1995. Franchise sales improved significantly in 1996, with 27 
new franchise licenses sold compared to seven new franchise licenses sold in 
1995. These sales, net of related costs, will be recognized as revenue when 
the Centers open for business.

         Operating revenue totaled $20,101,585 in 1998 compared to 
$21,169,314 in 1997 and $20,142,793 in 1996. The changes in revenue are due 
primarily to increases or decreases in the number of Company-owned Centers 
operated during the year and the number of Center openings 

                                     10

<PAGE>

as well as the number of Centers open and operating. In addition, leasing 
revenue decreased significantly in 1998 due to the release from nine leases 
at franchised and third party locations, thus reducing not only rental 
income, but the matching rent expense, and two sites were abandoned by a 
former franchisee. An increase in other revenue was recognized in 1997 due 
primarily to settlements with former franchisees.

         Royalty fees are a percentage of sales (ranging from 3% to 5%) paid 
monthly by all franchised Grease Monkey Centers. Royalty fee revenue 
decreased by 14% in 1998 to $2,981,454 and increased 10% in 1997 to 
$3,454,238. The decrease in royalty fees from 1997 to 1998 is partially due 
to the recording of the settlement agreement with a former franchisee. Under 
the settlement agreement, in 1997 the Company recognized approximately 
$207,200 of royalty fees not previously recognized. Contributing to the 
decline in royalties in 1998 was the signing of a Master Franchise Agreement 
for the Republic of Mexico on August 1, 1998, ("the Agreement"). The 
Agreement is for a term of fifteen years and is renewable for an additional 
fifteen-year term. The Master Franchisee retains eighty percent of royalties 
and franchise fees collected from Mexico franchisees after the effective date 
of the Agreement. The decrease in revenue related to this transaction, when 
compared with the prior year is approximately $40,000. On a same center 
basis, royalty income increased 1% or approximately $19,000 over the prior 
year. New Centers generated approximately $157,500 more in royalties over the 
prior year. These increases were offset by the loss of royalties related to 
terminated centers, Centers acquired from franchisees or Centers that were 
sold and left the system of approximately $327,000. The increase in royalty 
fees from 1996 to 1997 is due to the recording of a settlement agreement with 
a former franchisee in 1997, as discussed above. On a same Center basis, 
royalty income remained relatively constant increasing 4% or approximately 
$130,000 over the prior year. In addition, new Centers generated 
approximately $71,000 more in royalties over 1996. These increases were 
offset by the loss of royalties related to terminated centers and to Centers 
acquired from franchisees of approximately $112,000. The Company has a 
"non-accrual" policy wherein royalties are not accrued on certain financially 
troubled franchisees. In 1998, estimated royalties totaling $229,095 were not 
recognized as revenue pursuant to this policy, as compared to $146,875 in 
1997 and $111,525 in 1996. Any such royalty subsequently collected is 
recorded as revenue in the period the funds are received.

         The Company has a royalty rebate program for franchisees under which 
eligible franchisees can receive a rebate of royalties paid. To be eligible, 
franchisees must be in compliance with their franchise agreement, must be 
current on amounts owed the Company and pay all amounts coming due the 
Company on time during the period of the royalty rebate program. Management 
implemented this program to reward those franchisees who comply with their 
franchise agreement, have paid the Company on a regular and consistent basis, 
to accelerate cash flow, and to provide an incentive for franchisees to 
continue to pay on a timely basis. During 1998, the Company paid a total of 
$234,142 to franchisees under this program, as compared to $233,486 in 1997 
and $259,133 in 1996. The rebate is recorded as a reduction of royalty 
revenue. The royalty rebate program is not a requirement of the franchise 
agreement. Continuation of the program is reviewed by management on an annual 
basis. The royalty rebate program has been extended through December 31, 1999.

                                       11

<PAGE>

         The following table presents the activity of operating Centers:

<TABLE>
<CAPTION>

                                       1998        1997        1996
                                       ----        ----        ----
       <S>                            <C>         <C>         <C>
       Open at beginning of year        218         215         210
       Opened during year                18          16          11
       Terminated                       (18)        (11)         (6)
       Closed                            (3)         (2)         -
                                      ------      ------       -----
       Open at end of year              215         218         215
                                      ======      ======       =====
</TABLE>

         The following table presents the number of Centers open, systemwide
retail sales, royalty fees, total vehicles serviced and average sale per vehicle
for the United States, Mexico and systemwide:

<TABLE>
<CAPTION>

Centers Open:                                               1998                  1997                  1996
                                                      ----------------       ---------------       --------------
  <S>                                                 <C>                    <C>                   <C>
  US..............................................                 189                   197                  195
  Mexico..........................................                  26                    21                   20
                                                      ----------------       ---------------       --------------
  Systemwide......................................                 215                   218                  215
                                                      ================       ===============       ==============

Sales (000's):
  US..............................................    $         86,621                89,803               88,910
  Mexico..........................................               3,096                 3,457                2,159
                                                      ----------------       ---------------       --------------
  Systemwide......................................    $         89,717                93,260               91,069
                                                      ================       ===============       ==============

Percent change in sales:
  US..............................................                (4%)                    1%                    -
                                                      ================       ===============       ==============
  Mexico..........................................               (10%)                   60%                  63%
                                                      ================       ===============       ==============
  Systemwide......................................                (4%)                    2%                   1%
                                                      ================       ===============       ==============

Royalty fees (000's):
  US..............................................    $          2,910                 3,325                3,078
  Mexico..........................................                  71                   129                   66
                                                      ----------------       ---------------       --------------
  Systemwide......................................    $          2,981                 3,454                3,144
                                                      ================       ===============       ==============

Percent change in royalties:
  US..............................................               (12%)                    8%                 (2%)
                                                      ================       ===============       ==============
  Mexico..........................................               (45%)                   95%                  14%
                                                      ================       ===============       ==============
  Systemwide......................................               (14%)                   10%                 (2%)
                                                      ================       ===============       ==============

Vehicles serviced (000's):
  US..............................................               2,574                 2,730                2,731
  Mexico..........................................                 144                   154                  103
                                                      ----------------       ---------------       --------------
  Systemwide......................................               2,718                 2,884                2,834
                                                      ================       ===============       ==============

Average sale per vehicle:
  US..............................................    $          33.65                 32.89                32.55
                                                      ================       ===============       ==============
  Mexico..........................................    $          21.55                 22.41                21.04
                                                      ================       ===============       ==============
  Systemwide......................................    $          33.01                 32.33                32.14
                                                      ================       ===============       ==============
</TABLE>
                                      12

<PAGE>

         Franchise sales revenue represents initial payments received by the
Company from the buyers of its franchise. The fee is $28,000 (less for
franchises purchased prior to September 1992 and for additional franchises
purchased by existing franchisees) and is not refundable. In addition, the
Company collects development fees under ETD and AD Agreements as discussed
previously. Initial franchise fees and certain development fees are deferred and
recognized as revenue when the related Center opens for business. The following
table presents the number of franchises issued including related fees and costs,
and the nature of franchise sales revenue recognized:

<TABLE>
<CAPTION>

                                                                 1998                 1997                  1996
                                                          ----------------       ---------------       -------------
<S>                                                       <C>                    <C>                   <C>
Franchise licenses issued:
  US (1)...........................................                      4                    10                  20
  Mexico...........................................                      4                     4                   7
                                                          ----------------       ---------------       -------------
    Total..........................................                      8                    14                  27
                                                          ================       ===============       =============
Franchise fees paid:
  US...............................................       $         66,000               250,500             386,600
  Mexico...........................................                 74,000               124,000             154,800
                                                          ----------------       ---------------       -------------
    Total..........................................       $        140,000               374,500             541,400
                                                          ================       ===============       =============
Franchise costs deferred:
  US...............................................       $         27,096                61,976              99,964
  Mexico...........................................                 31,440                 7,600              11,177
                                                          ----------------       ---------------       -------------
    Total..........................................       $         58,536                69,576             111,141
                                                          ================       ===============       =============
Franchises opened:
  US (1)...........................................                      8                    14                   6
  Mexico...........................................                      8                     1                   4
                                                          ----------------       ---------------       -------------
    Total                                                               16                    15                  10
                                                          ================       ===============       =============
Franchise fees recognized on openings:
  US (2)...........................................       $        171,090               229,401             104,900
  Mexico...........................................                201,600                28,000              78,400
                                                          ----------------       ---------------       -------------
    Total..........................................       $        372,690               257,401             183,300
                                                          ================       ===============       =============
Franchise costs recognized on openings:
  US (3)...........................................       $         51,187                78,222              11,683
  Mexico...........................................                 37,056                 7,600              21,160
                                                          ----------------       ---------------       -------------
    Total..........................................       $         88,243                85,822              32,843
                                                          ================       ===============       =============
Undeveloped franchise
  licenses/applications cancelled..................                     25                     -                   5
                                                          ================       ===============       =============
Income recognized on                               
  cancellations....................................       $        202,491                     -              27,563
                                                          ================       ===============       =============
</TABLE>

                                      13

<PAGE>

(1) Excludes franchise licenses related to refranchised Company-owned Centers
during the year; none in 1998, three in 1997 and five in 1996.

(2) Excludes franchise fees related to refranchised Company-owned Centers; none
in 1998, $58,800 in 1997 and $128,800 in 1996.

(3) Excludes franchise costs related to refranchised Company-owned Centers; none
in 1998 and 1997 and $5,000 in 1996.

         At December 31, 1998, 26 franchises had been sold which were not 
open and commitment fees for 9 franchises had been paid, representing 
$467,253 in deferred franchise sales revenue, compared to 49 unopened 
franchises and commitment fees for 24 franchises representing $985,470 in 
deferred franchise sales revenue at the end of 1997.

         The Company terminated twenty-five undeveloped licenses/applications 
in 1998, none in 1997 and five in 1996 for non-performance, representing 
income of $202,491 in 1998 and $27,563 in 1996.

         In 1998, the Company realized marketing allowances and gross margins 
on product and equipment sales of $371,775, as compared to $460,359 in 1997 
and $436,033 in 1996. Product and equipment revenue represents the sale of 
fluid dispensing equipment and other supplies to franchisees, and marketing 
allowances relate to the sale of oil filters, air filters, oil additives and 
certain other products. Marketing allowances and gross margins on product and 
equipment sales decreased $88,584 in 1998. The number of Center openings and 
closures during a period will impact product and equipment revenue. Five of 
the Mexico Center openings were completed after the signing of the Master 
Franchise Agreement and thus did not purchase product and equipment through 
the U.S. vendor programs. Revenue in 1997 was comparable to that of 1996.

         Company-owned Centers at December 31, 1998, include 20 Centers 
located in Denver, Colorado, 8 Centers in Seattle, Washington, 2 Centers in 
California and 1 Center each in Indiana, Texas and Rhode Island.

                                      14

<PAGE>

         The following table shows the Company's activity with respect to
Company-owned Centers over the past three years:

<TABLE>
<CAPTION>

                                                      1998            1997            1996
                                                      ----            ----            ----
     <S>                                           <C>               <C>             <C>
     Company-owned Centers at
       the beginning of the year.................         31               31              29
     New Centers built or
       purchased.................................          2                4               2
     Centers acquired from
       failed franchisees........................          3                -               5
     Centers refranchised........................          -               (2)             (5)
     Centers closed..............................         (3)              (2)              -
                                                     ---------         --------        --------
     Company-owned Centers at
       the end of the year.......................         33               31              31
                                                     =========         ========        ========
     Average number of
       Centers operated during
       the year based on number
       of months operated........................         31               31              32
                                                     =========         ========        ========

</TABLE>

         Company-owned Centers have become a significant portion of the 
Company's business since 1990. Historically, Company-owned Centers were 
Centers relinquished by failed franchisees, acquired from franchisees through 
the Company's exercise of its right of first refusal, or purchased by the 
Company. Centers which, in the past, have been acquired from failed 
franchisees were acquired due to the failure of the franchisee to pay amounts 
due the Company, principally rents and royalties.

                                      15

<PAGE>

         The following table sets forth the results of operations from
Company-owned Centers:

<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                                   -------------------------------------------
                                                       1998           1997             1996
                                                   -----------     -----------      ----------
<S>                                                <C>             <C>              <C>
Income before depreciation,
  amortization and division overhead..........       2,373,964       2,052,704       2,011,429

Depreciation..................................        (590,569)       (564,846)       (565,490)
Amortization..................................        (246,881)       (259,812)       (225,518)
Company-owned Centers division
  overhead (1)................................        (695,985)       (819,154)       (678,476)
                                                   -----------     -----------      ----------
Operating income from
  Company-owned Centers (2)...................     $   840,529         408,892         541,945
                                                   ===========     ===========      ==========
Number of Centers by category:
  Built or purchased..........................              24              25              21
  Failed franchises acquired..................               9               6              10
                                                   -----------     -----------      ----------
     Total....................................              33              31              31
                                                   ===========     ===========      ==========

</TABLE>

(1)      Consists of management, accounting and administrative personnel and
         their related expenses which are directly identifiable to the
         Company-owned Centers division and is included in general and
         administrative expenses in the Company's financial statements.

(2)      Included in the above operating results are results from refranchised
         centers through the date of sale.

         Leasing revenue represents revenue primarily derived from properties
subleased by the Company to franchisees and third parties. Leasing revenue,
which includes rent and interest income related to capital and operating leases,
was $1,100,214 in 1998; $1,547,876 in 1997 and $1,434,086 in 1996. Leasing
revenue has declined $447,662 from 1997. Factors contributing to the decline
include: the abandonment of a franchise site late in the third quarter of 1997
resulting in the Company being required to subsidize the rent to obtain a new
subtenant; a former franchisee abandoned two sites in 1998, and the Company did
not receive matching revenue for the expense outlay on these Centers during the
year (the Company has entered into new sublease agreements for these two centers
in 1999). In addition, during 1998 the Company acquired three franchise sites
and was released from nine leases at franchised and third party locations, thus
reducing not only rental income, but also the matching rent expense. The Company
also sold one of its owned property locations and put another location up for
sale losing the third party subtenant income on those sites as well.

                                        16

<PAGE>

         Leasing expense represents leasing costs incurred in connection with
properties leased by the Company and then subleased to franchisees and third
parties. Leasing expense, which includes rent and interest expense related to
capital and operating leases, was $1,282,530 in 1998; $1,549,315 in 1997 and
$1,376,677 in 1996.

         The following table summarizes General and Administrative Expenses:

<TABLE>
<CAPTION>

                                                              1998            1997            1996
                                                          ------------     -----------     ----------
<S>                                                       <C>              <C>             <C>
Salaries, wages and personnel
  expenses........................................        $   2,121,976      2,213,725      2,007,997
Travel and entertainment
  expenses........................................              307,389        374,665        375,460
Office expenses...................................              601,027        631,059        648,552
Franchise development and
  training expenses...............................              163,372        121,467         48,555
Franchise sales and promotional
  expenses........................................               56,084         98,875         90,276
Terminated projects...............................              367,156         12,644        206,469
Litigation, including legal fees
  and related costs...............................              246,587        137,612        344,139
Professional fees - legal, tax and
  accounting......................................              261,281        233,910        145,733
Company-owned Centers division
  overhead........................................              693,941        819,150        678,476
Loss on sale of assets/asset
  impairment......................................               60,618         65,490          1,110
Consultant Agreement/severance
  expenses........................................              314,825        459,420              -
Other.............................................              403,676        214,456        193,614
                                                          -------------     ----------     ----------
  Total general and                               
    administrative expenses.......................        $   5,597,932      5,382,473      4,740,381
                                                          =============     ==========     ==========

</TABLE>

         General and Administrative expenses increased 4% in 1998 over 1997.
This increase is a result of several factors. One such factor was a severance
accrual in the amount of $314,825 for the Company's former President and Chief
Executive Officer, the former Senior Vice President of Operations and other
employees. The Company had also previously entered into an agreement for the
development of a new point of sale system to be used at both Company-owned and
franchised Centers. Upon review of the agreement by current management, further
development was terminated and costs capitalized to date were expensed in the
amount of approximately $230,000. As mentioned previously, during 1998 the
Company entered into a Master Franchise Agreement for the Republic of Mexico.
Based upon this agreement, certain assets related to operations in Mexico were
evaluated and adjusted, resulting in a write-off of approximately $132,000.
Other factors include costs associated with a potential corporate restructuring
of approximately $110,000 and increases in litigation expenses, including legal
fees and related costs of approximately $109,000. These increases were offset by
decreases in costs associated with salaries, wages and personnel expenses of
approximately $91,000, travel and 

                                      17

<PAGE>

entertainment expenses of approximately $67,000, and Company-owned Centers 
division overhead of approximately $125,000.

         The 14% increase in general and administrative expenses from 1996 to 
1997 is due primarily to the accrual of the Company's obligation under a 
Consultant Agreement with the Company's previous, now current, President as 
described above. Other factors include increases in Company-owned Centers 
division overhead, professional fees related to legal issues, salaries, wages 
and personnel expenses and franchise development and training expenses.

         The provision for credit losses increased in 1998 to $310,708 from 
$253,368 in 1997 and from $206,221 in 1996. The increase in 1998 is primarily 
attributed to a former franchisee that abandoned two sites in 1998, which 
required additional provisions. Additional provisions were also recorded on 
all Mexico franchisees that were delinquent on August 1, 1998, when the 
Company entered into a Master Franchise Agreement for the Republic of Mexico 
discussed previously. The increase in 1997 is due primarily to a more 
aggressive policy for addressing non-performing accounts, which resulted in 
additional provisions on eight non-performing franchisee accounts.

         Depreciation expense totaled $723,115 in 1998 compared to $688,041 
in 1997 and $694,241 in 1996. The depreciation expense increased $35,074 in 
1998, primarily due to increased capital expenditures in 1998. A new phone 
system was installed in the corporate office in addition to new computer 
equipment and software programs. This is a part of the process the Company is 
currently undertaking to become "Year 2000" compliant. Company-owned Centers 
capital expenditures also increased primarily due to two new Center openings. 
The depreciation expense in 1997 compared to 1996 remained relatively 
constant. Amortization expense totaled $289,829 in 1998 compared to $284,689 
in 1997 and $245,454 in 1996. The increase in amortization expense from 1996 
to 1997 is due to the purchase of two Company-owned Centers in 1997.

         Gain (loss) on sale/disposition/closure of Centers represents the 
net results of the refranchising/disposal/closure of Company-owned Centers. 
When the Company refranchises a Center, a franchise license fee is included 
in the sales price and included in the resulting gain or loss on sale. The 
loss of $444,725 in 1998 represents the closure of two Company-owned Centers 
in 1998, marketing allowances paid based on subsidies granted certain 
franchisees on the refranchising of Company-owned Centers in 1996 and 
additional costs incurred in 1998 related to the closure of Company-owned 
Centers closed in 1997. In addition, losses were recognized on the sale of a 
Company-owned Center to a third party, and the foreclosure of two franchised 
Centers. An impairment assessment was recorded on two Centers that were 
abandoned by a franchisee, and one Company-owned Center, which sold in 1999. 
The Company signed a Management Agreement at two of its Company-owned 
Centers, and recorded an impairment assessment. The loss of $368,169 in 1997 
represents the refranchising of two Company-owned Centers, the sale of one 
Center, the closure of three Centers, and marketing allowances paid based on 
subsidies granted certain franchisees on the refranchising of Company-owned 
Centers in 1996.

                                      18

<PAGE>

         In 1998, the Company recognized $202,491 in franchise sales revenue
resulting from license cancellations. There were no license cancellations in
1997.

         Interest expense includes interest on debt financing and interest
recorded on capital leases of Company-owned Centers. The increase in interest
expense from $774,671 to $827,185 in 1998 was due primarily to an increase in
average debt outstanding of approximately $1,150,000. This increase is due in
part to borrowings associated with the purchase of two Centers late in the first
quarter of 1997, and two Centers purchased/developed in 1998. Also,
approximately $600,000 ($409,000 from a related party) was borrowed in 1998 for
working capital. Capital leases were entered into for Company-owned Centers in
the early third quarter of 1997 and the late second quarter of 1998, thus adding
to interest expense.






                                     19

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

CAPITAL RESOURCES

         The Company currently has lines of credit with varying interest 
rates from a or guaranteed by a related party. The lines total $489,000 of 
which $484,500 was outstanding at December 31, 1998. Monthly payments are for 
interest only and the balance is due upon demand.

         In September 1997, the Company entered into a $5,000,000 Loan 
Agreement with a bank. In connection with the Company entering into a Master 
Supply Contract with a motor oil supplier, the supplier agreed to guarantee 
the loan. Draws under the Loan Agreement were used for the purpose of paying 
off certain debt, including the Company's former Loan Agreement and Fast Lube 
Supply Agreement, and will be used for acquiring, constructing and/or 
developing Company Centers and for working capital. Any draws are evidenced 
by notes which amortize over ten years with a five year ballon payment and 
bear interest at a rate provided under the Loan Agreement plus guarantee 
fees. For an increased guarantee fee, the Company can extend the payment 
terms an additional five years. An initial draw of $2,620,000 was made on 
September 29, 1997, with interest at 9.26% plus guarantee fees. Additional 
draws totaling $2,198,600 were made in 1998 with an average interest rate of 
approximately 9% plus guarantee fees. As of December 31, 1998, approximately 
$4,533,000 is outstanding under the loan agreement. The remaining $181,400 
available for draw on the Loan Agreement was drawn in the first quarter of 
1999.

         In May 1996, the Company entered into a Business Loan Agreement with 
a bank for a $2,000,000 three year line of credit. Funds drawn under the line 
are restricted to the development of new Centers. The Company has the right 
to select an optional interest rate as described in the agreement, however, 
in no case will the interest rate exceed the bank's reference rate. In 
exchange for a supply agreement on any Centers built utilizing the line of 
credit, a motor oil supplier agreed to guarantee the line. As of December 31, 
1998, there were no amounts outstanding under this line of credit.

         The growth of the Grease Monkey system is dependent on the ability 
of the Company and its franchisees to obtain real estate development capital. 
Historically, Grease Monkey Centers have been built utilizing build-to-suit 
services, whereby the land is purchased and the building is constructed to 
the Company's specifications, then leased to the Company or to a franchisee, 
by a third party. Recently, franchisees have moved toward purchasing and 
developing the real estate for their own account, thereby creating greater 
value in their business.

LIQUIDITY

         Cash provided by operations during 1998 was $180,773 as compared to 
$931,907 in 1997. The most significant factors contributing to this variance 
were the prior year settlement agreements entered into with former 
franchisees as discussed previously; a decline in royalty revenue and 
collections; a decrease in franchise sales; losses in leasing activities and 
increased 

                                      20

<PAGE>

financing costs. Offsetting these negative factors was an improved operating 
margin at Company-owned Centers.

         Cash used for investing activities was $1,819,082 in 1998 and 
$714,473 in 1997. Cash provided in both periods consisted primarily of 
receipts on direct financing leases, of $169,562 in 1998 and $189,926 in 1997 
and receipt of payment on notes receivable from developers of $190,000 in 
1998 and $225,000 in 1997. Additional cash was received in 1998 and 1997 of 
$115,450 and $116,901 with the sale/refranchising of one and three 
Company-owned Centers, respectively. Cash used in investing activities for 
1998 and 1997 consisted primarily of cash used for the development/purchase 
of Centers of $1,594,658 and $729,493. Additional cash was used in both 
periods for the purchase of property and equipment, primarily at the 
Company-owned Centers.

         Cash provided by financing activities was $1,601,565 in 1998 and 
cash used in financing activities was $359,965 in 1997. Cash provided by 
financing activities in 1998 consisted primarily of proceeds from long-term 
obligations for the development of Centers and working capital of $2,683,100. 
Cash provided by financing activities in 1997 included proceeds from 
long-term debt of $3,045,000 (of which approximately $2,048,000 was used to 
repay existing debt), and proceeds from the sale of common stock of $282,563. 
Cash used to reduce long-term debt was $666,293 in 1998 and $3,316,796 in 
1997 and cash used to reduce capital lease obligations was $439,362 in 1998 
and $409,115 in 1997.

         The Company does not have any material commitments for capital 
expenditures other than for the required replacement or upgrade of 
underground storage tanks at Company-owned Centers and the costs to achieve 
Year 2000 compliance.

         The Company has incurred losses from operations that have increased 
over the past three years coupled with a decrease in cash flow from 
operations for the same period. As of December 31, 1998, the Company had a 
working capital deficit of $1,807,953 and total liabilities exceeded total 
assets. These factors among others may indicate that the Company may not be 
able to meet its obligations in a timely manner without increased cash flow 
from operations, sale of non-producing assets or additional financing.

         The Company has taken steps to reduce losses and generate cash flow 
from operations and anticipates the sale of non-producing assets which will 
generate sufficient cash flow to meet its obligations in a timely manner. 
Should the Company be unable to achieve its projected level of cash flow from 
operations or sell its non-producing assets, additional financing could be 
necessary. The Company has entered into a merger agreement (see Note K to the 
Consolidated Financial Statements) that would result in the sale of the 
Company. As a result of the current merger agreement, the Company is not 
actively investigating financing alternatives. Should the merger not proceed, 
the Company believes it could obtain additional financing, however, there can 
be no assurance that such financing would be available on a timely basis or 
on acceptable terms.

                                      21

<PAGE>

THE YEAR 2000 ISSUE

THE PROBLEM

         The Year 2000 issue is the result of the inability of hardware, 
software and control systems to correctly identify two-digit references to 
specific years, beginning with the Year 2000. This could result in system 
failures or miscalculations causing disruptions of the Company's operations 
and the Company's suppliers.

STATE OF READINESS

         The Company has instituted a Year 2000 project. As part of the 
project, the Company has completed an initial evaluation of its computer 
systems and significant software programs. This evaluation included the 
Company's network hardware and software, Point-of-Sale hardware and software 
at the Company-owned Centers and accounting and business process software. 
Based on the results of the initial evaluation, the Company has developed an 
implementation plan to replace the systems noted in the Company's initial 
evaluation that did not appear to be Year 2000 compliant. The Company 
estimates this process to be completed by August 1999.

         As part of the Company's Year 2000 project, the Company plans to 
contact its significant third party suppliers, such as the Company's oil and 
parts suppliers, to determine the extent to which the Company is vulnerable 
to its suppliers' failure to remediate their Year 2000 issues. The Company 
plans to complete the contacts with suppliers by the end of the second 
quarter 1999. However, the Company cannot assure that third-party suppliers 
will adequately address their Year 2000 issues or that failure of the 
third-party suppliers to address their Year 2000 issues would not have a 
material adverse effect on the Company or its operations.

         In addition, the Company has commenced initial communication with 
its franchisees to determine the extent to which the Company is vulnerable to 
the franchisees' failure to remediate their Year 2000 issues. The Company 
plans to complete the contacts with its franchisees by the end of the second 
quarter 1999. However, the Company cannot assure that the franchisees will 
adequately address their Year 2000 issues or that failure of the franchisees 
to address their Year 2000 issues would not have a material adverse effect on 
the Company or its operations.

THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

         Expenditures through December 31, 1998, have been minimal. Based 
upon the findings at December 31, 1998, the Company's estimated costs of 
becoming Year 2000 compliant are less than $150,000.

THE RISKS ASSOCIATED WITH THE COMPANY'S YEAR 2000 ISSUES

         The Company's failure to resolve Year 2000 issues on or before 
December 31, 1999, could result in system failures or miscalculation causing 
disruption in operations and normal 

                                     22

<PAGE>

business activities. Additionally, failure to timely remediate Year 2000 
issues by third parties upon whom the Company's business relies could result 
in disruptions in the Company's supply of parts and materials or result in 
other problems related to the Company's daily operations.

CONTINGENCY PLAN

         The Company is currently working on a contingency plan for all 
critical aspects of the Year 2000 issues and anticipates to have such a plan 
completed by the second quarter of 1999.

FORWARD-LOOKING STATEMENTS

         The foregoing discussion contains certain forward-looking statements 
within the meaning of Section 27A of the Securities Act of 1933 and Section 
21E of the Securities Exchange Act of 1934, which are intended to be covered 
by the safe harbors created thereby. These statements include the plans and 
objectives of management for future operations. Such statements are dependent 
on certain risks and uncertainties including such factors among others as, 
obtaining financing, construction delays that may be encountered in opening 
new Centers, market or customer acceptance, market demand, competition, 
pricing, changing regulatory environment, changing economic conditions, risks 
in new service development, and other risk factors. The forward-looking 
statements included herein are based on current expectations that involve 
numerous risks and uncertainties. Assumptions relating to the foregoing 
involve judgments with respect to, among other things, future economic, 
competitive and market conditions and future business decisions, all of which 
are difficult or impossible to predict accurately and many of which are 
beyond the control of the Company. Although the Company believes that the 
assumptions underlying the forward-looking statements are reasonable, any of 
the assumptions could be inaccurate and, therefore, there can be no assurance 
that the forward-looking statements included in this Form 10-KSB will prove 
to be accurate. In light of the significant uncertainties inherent in the 
forward-looking statements included herein, the inclusion of such information 
should not be regarded as a representation by the Company or any other person 
that the objectives and plans of the Company will be achieved.

ITEM 7.  FINANCIAL STATEMENTS

         All financial statements required to be filed hereunder are attached 
hereto following the signature page.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

         None.

                                      23

<PAGE>

                                   PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         (a)   IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.

               DIRECTORS.

         The present term of office of each director will expire at the next
Annual Meeting of Shareholders. The name and position with the Company and age
of each director and the period during which each director has served are as
follows:

<TABLE>
<CAPTION>

         Name and Position, if                                      Director
         any, in the Company                  Age                     Since
         ---------------------              --------                ---------
         <S>                                <C>                     <C>
         James B. Wallace                      70                      1991
         (Chairman of the Board
         and Chief Executive Officer)

         Rex L. Utsler                         53                      1998*
         (President, Chief
         Operating Officer and
         Corporate Secretary)

         Jerry D. Armstrong                    68                      1991

         Jim D. Baldwin                        66                      1994

         Cortlandt S. Dietler                  77                      1995

         Wayne H. Patterson                    53                      1994

         George F. Wood                        55                      1991

</TABLE>

There are no arrangements or understanding between any director and any other
person pursuant to which any director was selected as such.

* Mr. Utsler previously held the positions of President and Chairman of the
Board of Grease Monkey Holding Corporation, Grease Monkey International, and all
other wholly-owned subsidiaries of the Company from March 1991 through February
1996.

                                       24

<PAGE>

               EXECUTIVE OFFICERS.

         The executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each Annual Meeting of
Shareholders. Each executive officer will hold office until his or her successor
is duly elected and qualified or until his or her death or resignation or until
he or she shall have been removed in the manner provided in the Company's
Bylaws. The current executive officers of the Company are as follows:

<TABLE>
<CAPTION>

         Name of Executive Officer                                Officer
         and Position in Company                         Age       Since
         -------------------------                     -------    --------
         <S>                                           <C>        <C>
         James B. Wallace                                 70        1998
         (Chairman of the
         Board and Chief
         Executive Officer)

         Rex L. Utsler                                    53        1998*
         (President, Chief
         Operating Officer
         and Corporate Secretary)

         Michael J. Brunetti                              42        1995
         (Vice President -
         Franchise Sales, Development & Real Estate)

</TABLE>

* Mr. Utsler previously held the positions of President and Chairman of the
Board of Grease Monkey Holding Corporation, Grease Monkey International, and all
other wholly-owned subsidiaries of the Company from March 1991 through February
1996.

                                       25

<PAGE>

               BUSINESS EXPERIENCE.

         The following is a brief account of the business experience for at
least the last five years of each director and executive officer of the Company:

<TABLE>
<CAPTION>

   Name of Director
   or Executive Officer    Principal Occupation During the Last Five Years
   --------------------    -----------------------------------------------
   <S>                     <C>
   Rex L. Utsler           President, Chief Operating Officer and Director of
                           Grease Monkey Holding Corporation ("GMHC"), Grease
                           Monkey International, Inc. ("GMI"), and all other
                           wholly-owned subsidiaries of the Company since
                           September 1998.  Consultant to GMHC March 1996 -
                           September 1998.  President and Chairman of the
                           Board of GMHC, GMI and all other wholly-owned
                           subsidiaries of the Company March 1991 - February
                           1996.  President and Chief Executive Officer of
                           both First of September Corporation, a financial
                           investment group, and its predecessor, Bountiful
                           Corporation, which was involved in crude oil
                           gathering, transporation and marketing from 1979 -
                           June 1997.  Director and Vice President of
                           FanEnergy Inc. since 1997.

   Michael J. Brunetti     Vice President, Franchise Sales, Development and
                           Real Estate of GMI since September 1998; Vice
                           President, Franchise Development of GMI from July
                           1995 to September 1998; Director of Region
                           Development - Western Region for Moto Photo Inc.,
                           a franchisor of photography imaging centers, from
                           March 1993 to July 1995.  Employed by Taco Johns
                           International, Inc., a franchisor of fast food
                           Mexican style restaurants, most recently as Vice
                           President of Franchise Development, from August
                           1987 to August 1992.

   Jerry D. Armstrong      Partner in Brownlie, Wallace, Armstrong and Bander
                           Exploration (BWAB), an oil and gas company, since
                           1992; Senior Vice President and member of the Board
                           of Directors of BWAB Incorporated from 1980 to 1992.

   Jim D. Baldwin          Retired President of King Soopers, a retail
                           grocery store chain owned by Dillon Companies, a
                           subsidiary 

                                      26

<PAGE>

                           of The Kroger Company, from 1979 to 1990.  Mr. 
                           Baldwin was with Dillon Companies for over 40 years.
                           Mr. Baldwin is on the Board of Directors for Channel
                           6 KRMA TV.

   Cortlandt S. Dietler    Chairman and CEO of TransMontaigne Oil Company, an
                           oil and gas company, since April 1995;  Chairman,
                           Founder and CEO of Associated Natural Gas
                           Corporation, a gas gathering, processing and
                           marketing company from 1980 to 1994.  Mr. Dietler
                           is also on the Board of Directors for the
                           following public companies:  Forest Oil
                           Corporation, Key Production Company, Inc., and
                           Hallador Petroleum Corporation.

   Wayne H. Patterson      Chairman, QuickPen International, a commercial
                           software and systems company, since December 1992;
                           Principal, Patterson Consulting, a management
                           consulting firm, since December 1991; Chairman,
                           Live Entertainment, 1990 to 1991; Chairman, Pace
                           Membership Warehouse, from 1988 to 1990.

   James B. Wallace        Partner in Brownlie, Wallace, Armstrong and Bander
                           Exploration (BWAB) since 1992; President and
                           member of the Board of Directors of BWAB
                           Incorporated from 1980 to 1992.  Mr. Wallace is
                           also a member of the Board of Directors of Tom
                           Brown, Inc., (a public company).

    George F. Wood         President of Wood and Co., an investment
                           management firm, since 1982.

</TABLE>

         (b)  IDENTIFICATION OF SIGNIFICANT EMPLOYEES:   None.

         (c)  FAMILY RELATIONSHIPS.  None

         (d)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.    None.

         (e)  SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

         Section 16(a) of the Securities Exchange Act of 1934 requires the 
Company's officers and directors and persons who own more than ten percent of 
the Company's outstanding common stock to file reports of ownership and 
changes in ownership with the Securities and Exchange Commission ("SEC"). 
Officers, directors and greater than ten percent shareholders are required by 
SEC regulations to furnish the Company with copies of all Section 16(a) forms 
they file.

                                     27

<PAGE>

         Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during and for the Company's fiscal year ended December
31, 1998, the following directors, officers and more than ten percent
shareholders of the Company who failed to timely file a Form 3, Form 4 or Form 5
were: Jerry D. Armstrong, James B. Wallace and George F. Wood who each have not
filed a Form 4 reporting two transactions, and Ray O. Brownlie, J.H. Bander,
Cortlandt S. Dietler, Wayne H. Patterson, and Jim D. Baldwin who each have not
filed a Form 4 reporting one transaction.

ITEM 10.  EXECUTIVE COMPENSATION

         (a) and (b) GENERAL AND SUMMARY COMPENSATION TABLE

         The following table shows all plan and non-plan compensation paid by
the Company and its subsidiaries to the below named executive officers of the
Company for services rendered for the fiscal years ended December 31, 1998, 1997
and 1996. No other executive officers of the Company received total cash
compensation from the Company and its subsidiaries that exceeded $100,000 for
the fiscal year ended December 31, 1998:

                         SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                                    Long Term
                                                                                                    Securities
                                                                               Other Annual         Underlying
    Name                   Principal Position              Year    Salary     Compensation       Options/SAR's(#)
    ----                   ------------------              ----    ------     -------------      ----------------
<S>             <C>                                        <C>    <C>         <C>                <C>
Rex L. Utsler   President and Chief Operating Officer and
                Director of GMHC and GMI(1)                1998   $177,907        2,400 (2)              -
                                                           1997   $179,868        8,386 (2)              -
                                                           1996   $163,417       11,450 (2)            12,500

Charles E.      President and Chief Executive Officer and
Steinbrueck     Director of GMHC and GMI (3)               1998   $130,481            -                  -
                                                           1997   $114,182            -               750,000
                                                           1996   $  -                -                10,000

</TABLE>

(1) Mr. Utsler resigned as the Chairman of the Board and President of the
Company on February 6, 1997, and returned to the Company as President and Chief
Operating Officer on September 17, 1998, and was also named a Director on that
date. Mr. Utsler was paid under a consulting contract during the interim period
(amounts paid under the contract are included above). See "Item 12. Certain
Relationships and Related Transactions."

(2) Includes costs of a leased car, country club dues and the Company's 401(k)
matching contribution in 1996 and 1997 and costs of a leased car in 1998.

(3)  Mr. Steinbrueck became President and Chief Executive Officer on February 6,
1997, and resigned from those positions on September 16, 1998.  Mr. Steinbrueck
served as a Director from 1994 - 1998.  Mr. Steinbrueck continues to be paid
under an Employment Agreement with the Company through January 2000.  See "Item
12. Certain Relationships and Related Transactions."

                                        28

<PAGE>

         COMPENSATION UNDER PLANS

         On May 4, 1992, GMI adopted the Grease Monkey International, Inc.
401(k) Savings and Retirement Plan and Trust Agreement (the "Plan"), effective
as of April 1, 1992, and as amended September 1, 1998. U.S. Bank National
Association is Trustee under the Plan. At present, the Company contributes to
the Plan on a quarterly basis in an amount equal to 50% of the employees'
contribution, up to a maximum of 6% of the employees' compensation. The
Company's contribution is paid with its $0.03 par value common stock valued at
market on the date of the contribution. During 1998, the Company contributed
10,810 shares to the Plan at an average of $1.25 per share. During 1997, the
Company contributed 33,234 shares to the Plan at an average of $1.36 per share.

         (c) and (d)  STOCK OPTION, GRANTS AND EXERCISES .

         STOCK OPTION PLANS

         The Company adopted the 1986 Incentive Stock Option Plan ("1986 Plan")
which was approved by the shareholders on February 17, 1987, in which the
employees of the Company and its subsidiaries are eligible to participate. The
1986 Plan authorized the granting of options to purchase up to 66,667 shares of
the Company's common stock. No further options can be granted under the 1986
Plan.

         The Company adopted the 1993 Incentive Stock Option Plan ("1993 Plan")
which was approved by the shareholders on June 30, 1993. All employees of the
Company and its subsidiaries are eligible to participate. The 1993 Plan
authorizes the granting of options to purchase 300,000 shares of the Company's
common stock.

         The Company adopted the 1994 Stock Incentive Plan ("1994 Plan") which
was approved by the shareholders on July 11, 1994. All employees, officers,
directors and consultants of the Company and its subsidiaries are eligible to
participate. The 1994 Plan originally reserved 500,000 shares for grant or
awards under the Plan. In June 1997, the Company's shareholders approved an
additional 500,000 shares.

         The 1986, 1993 and 1994 Plans are administered by an Option Committee
of not less than three persons appointed by the Board of Directors. The members
of the Option Committee for 1998 were Jerry D. Armstrong, Jim D. Baldwin and
George F. Wood. The Option Committee did not meet during 1998. New members of
the Option Committee will be selected after the Annual Meeting of Shareholders.

         The Option Committee selects the persons to whom options are 
granted, determines the time or times when any option granted becomes 
exercisable, determines the period within which it becomes exercisable and 
determines the price per share at which the option is exercisable, provided 
that no option may be exercised more than 10 years after it is granted and 
the exercise price must be at least the fair market value of the Company's 
common stock on the date of the 

                                      29

<PAGE>

grant. If an employee owns more than 10% of the Company's outstanding common 
stock, then the Option Committee may grant an incentive option to such 
employee only if the exercise price of the option is at least 110% of the 
fair market value of the Company's common stock on the date of the grant. An 
incentive option granted to any employee owning more than 10% of the 
Company's outstanding common stock may not be exercisable for longer than 
five years from the date of the grant.

         Payment for shares of common stock purchased upon exercise of any
option must be in full and in cash or, with certain restrictions, the surrender
of other shares of common stock of the Company owned by the employee at the time
the option is exercised.

         No options were granted to or exercised by Rex L. Utsler or Charles E.
Steinbrueck during the year ended December 31, 1998.




                                     30

<PAGE>

         The following table sets forth information pertaining to the options 
that were held by Rex L. Utsler and Charles E. Steinbrueck as of December 31, 
1998. Neither Mr. Utsler nor Mr. Steinbrueck exercised any options during the 
year ended December 31, 1998.

   Aggregated Option/SAR Exercises in Last Fiscal Year and Option/SAR Values

<TABLE>
<CAPTION>
                         Number of Securities      Value of Unexercised In-the-
                        Underlying Unexercised         Money Options/SARs at
                       Options/SARs at FY-End(#)              FY-End
                       -------------------------     -------------------------
Name                   Exercisable/Unexercisable     Exercisable/Unexercisable
                       -------------------------     -------------------------
<S>                    <C>                           <C>
Charles E.
Steinbrueck                    330,000/0                     - 0 - (1)
Rex L. Utsler                  62,500/0                      - 0 - (1)
</TABLE>

     (1) The exercise prices were above the market price of the common stock on
         December 31, 1998.

         (e)  LONG-TERM INCENTIVE PLAN.  None.

         (f)  COMPENSATION OF DIRECTORS.

         Directors of the Company who are not employees or officers are granted
stock options as compensation. Options are granted for services provided as a
director, with additional options granted for committee participation. Options
for 5,000 shares are granted annually for service as a director, options for
2,500 shares are granted annually for service on the Option/Compensation and
Audit Committees and options for 5,000 shares are granted annually for service
on the Executive Committee.

         Options were granted on March 24, 1998, for services rendered for the
period June 1997 to June 1998.

         (g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND 
CHANGE-IN-CONTROL ARRANGEMENTS. See "Item 12. Certain Relationships and 
Related Transactions" for information pertaining to a consultant agreement 
with Rex L. Utsler and an employment agreement with Charles E. Steinbrueck.

         (h)  REPORT ON REPRICING OF OPTIONS/SARS.  None.

                                     31

<PAGE>

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

         (a) and (b)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
MANAGEMENT.

         The following table sets forth as of February 26, 1999, the number 
of shares of the Company's $0.03 par value common stock owned by each person 
who owned of record, or was known to own beneficially, more than 5% of the 
number of shares of the Company's outstanding common stock, sets forth the 
number of shares of the Company's outstanding common stock beneficially owned 
by each of the Company's directors, and sets forth the number of shares of 
the Company's common stock beneficially owned by all of the Company's 
directors and officers as a group:

<TABLE>
<CAPTION>

                                                                               Shares
                                                                              Underlying
                                                                               Presently
                                                             Shares           Convertible
                                                           Underlying          Series C
                                        Shares of           Presently          Preferred
         Name of                         Common            Exercisable           Stock
       Beneficial                         Stock            Options and         and Unpaid               Total          Percent of
        Owner(1)                          Owned           Warrants (3)        Dividends(4)            Ownership        Class (6)
       ----------                        -------          ------------        -----------             ---------        ----------
<S>                                      <C>              <C>                 <C>                     <C>              <C>
Rex L. Utsler(2)(5)                      640,315              62,500             56,473                759,288            15.9%

Jerry D. Armstrong(2)                    438,820             140,000             87,406                666,226            13.7%

James B. Wallace(2)                      443,821             135,000             61,410                640,231            13.2%

Cortlandt S. Dietler(2)                   55,556              30,000             20,797                106,353             2.3%

George F. Wood(2)                         38,639              35,000              5,199                 78,838             1.7%

Wayne H. Patterson(2)                        -                47,500             25,997                 73,497             1.6%

Jim D. Baldwin(2)                            -                32,500             12,998                 45,498             1.0%

All officers and directors as
   a group (8 persons)                 1,617,151             532,500            270,280              2,419,931            44.4%

Ray O. Brownlie(2)                       442,375             100,000             61,410                603,785            12.6%

J. H. Bander(2)                          407,709             100,000             61,410                569,119            11.8%

Charles E. Steinbrueck(2)                190,476             330,000             38,995                559,471            11.2%
</TABLE>

         (1) All beneficial owners listed have sole voting and/or investment
power with respect to the shares shown unless otherwise indicated.

                                      32

<PAGE>

         (2) The address for Rex L. Utsler is 633 17th Street, Suite 400, 
Denver, Colorado 80202. The address for Messrs. Armstrong, Wallace, Brownlie 
and Bander is 475 17th Street, Suite 1300, Denver, Colorado 80202. The 
address for Charles E. Steinbrueck is P.O. Box 6226, Denver, Colorado 80206. 
The address for Cortlandt S. Dietler is 2750 Republic Plaza, 370 Seventeenth 
St., Denver, Colorado 80202. The address for George F. Wood is 55 Madison 
Street, Suite 680, Denver, Colorado 80206. The address for Wayne H. Patterson 
is 384 Inverness Drive South, Suite 200, Englewood, Colorado 80112. The 
address for Jim D. Baldwin is 706 Golf Club Drive, Castle Pines Village, 
Colorado 80104.

         (3)  Represents shares of common stock underlying presently 
exercisable options and warrants.

         (4) Represents shares of common stock underlying shares of Series C, 
6% Preferred stock with a stated value of $100 per share plus accumulated 
unpaid dividends, convertible into common stock at $2.50 per share.

         (5) Does not include 3,100 shares held by Mr. Utsler's children, of 
which he disclaims beneficial ownership.

         (6) Assumes all options and warrants are exercised and all Series C 
Preferred stock and accumulated dividends are converted.

         (c) CHANGES IN CONTROL. On March 26, 1999, the Board of Directors of 
the Company entered into a definitive merger agreement with QL 3000, Inc., a 
privately held company based in Jacksonville, Florida. The merger agreement 
provides that each shareholder of the Company will receive $1.00 for each 
share of the Company's common stock. Holders of the Company's preferred stock 
will receive the stated value of their preferred stock plus all accrued and 
unpaid dividends. QL 3000 must complete debt and equity financing to fund the 
merger consideration. The Company may terminate the merger agreement if QL 
3000 has not received a commitment letter for the debt financing by May 
25,1999. In addition, completion of the merger is subject to regulatory and 
shareholder approvals.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On February 5, 1997, the Company entered into a Consultant Agreement 
with Rex L. Utsler. The original term of the Agreement was from March 4, 1997 
through March 3, 1999. The agreement required Mr. Utsler to perform such 
duties and services as may be assigned to him from time to time at the 
direction of the Company. For these services, Mr. Utsler was paid a fee of 
$16,071 per month, was reimbursed for his expenses incurred on behalf of the 
Company and received medical benefits provided generally to the Company's 
employees. When Mr. Utsler returned to the Company as President, Chief 
Operating Officer and Director, the Agreement was amended. The monthly 
consulting fees of $16,071 were suspended. The remaining, unpaid consulting 
fees from the period September 18, 1998 through March 3, 1999, will convert 
to severance payments in the event of any change in the employment 
relationship between Mr. Utsler and the Company, including a change in 
control of the Company. In addition, Mr. Utsler will accrue one month of 
additional severance pay effective beginning September 18, 1998, for each 
month of employment as President and Chief Operating Officer, to a maximum 
severance compensation of 24 months' pay.

                                     33

<PAGE>

         On August 5, 1991, the Company issued warrants to First of September 
Corporation to purchase 500,000 shares of its common stock for $1.50 per 
share. In exchange, First of September Corporation provided the Company with 
a $750,000 line of credit which was repaid on March 23, 1994, and was 
canceled. The warrants were to expire on August 4, 1996, but were extended in 
March 1996 by the Board of Directors to August 4, 1998, as consideration for 
First of September Corporation's agreement to cooperate in an equity and debt 
financing, then under consideration. The increase in the estimated fair value 
of the warrants of $54,000 was recorded as an increase in stockholder's 
equity and deferred offering costs. The offering costs were subsequently 
written off when the proposed financing was abandoned. On June 30, 1997, 
First of September Corporation was dissolved and any ownership of the 
Company's common stock, preferred stock and the warrants mentioned previously 
were transferred to First of September Corporation's shareholders. The 
warrants were allowed to expire.

         During 1998, the Company borrowed a total of $409,000 from Brownlie, 
Wallace, Armstrong and Bander Exploration, a related party of the Company. 
The principals of Brownlie, Wallace, Armstrong and Bander Exploration, James 
B. Wallace and Jerry D. Armstrong, are directors and shareholders, and Ray O. 
Brownlie and J.H. Bander are shareholders of the Company. The notes are due 
upon demand and bear interest at one percent over the Bank National 
Association Reference Rate. At December 31, 1998, these rates varied from 8.5 
to 8.75 percent. During 1998, the Company expensed $16,330 in interest, all 
of which was accrued at December 31, 1998. In addition, this related party 
guaranteed a note payable with a bank in the amount of $75,500.

         As compensation for a guarantee of a standby letter of credit in 
favor of the Company's landlord for its corporate office space, the four 
principals of the previously mentioned related party were granted two year 
warrants to purchase 100,000 shares each of the Company's common stock for 
$1.05 per share. The $292,000 letter of credit expires on February 1, 2000, 
and the balance decreases on a quarterly basis beginning January 1, 1999. The 
fair value of the warrants (approximately $116,000) was recorded as an 
increase in stockholder's equity and as an other asset which will be 
amortized over the term of the letter of credit.

         On March 12, 1998, the Company entered into an Employment Agreement 
("Agreement") with Charles E. Steinbrueck pursuant to which the Company 
employed Mr. Steinbrueck as the President and Chief Executive Officer of the 
Company effective January 20, 1997. Upon Mr. Steinbrueck's resignation in 
September 1998, the Company began paying Mr. Steinbrueck under said agreement 
and payments will continue through January 2000, at his then current annual 
salary of $125,000. Pursuant to the Agreement, Mr. Steinbrueck was granted 
stock options for 750,000 shares of the Company's common stock that have an 
exercise price of $1.3125 per share. The options vested as to 100,000 shares 
as of January 20, 1997, and options for the remaining 650,000 shares were to 
vest over a three year period, subject to the attainment by the Company of 
certain performance criteria, so that options with respect to 200,000 shares 
would become exercisable on December 31, 1997, options with respect to 
200,000 shares would become exercisable on December 31, 1998, and options for 
250,000 shares would become exercisable on December 31, 1999. The options 
were only to become exercisable if the Company attained minimum corporate 
earnings for the years ended December 31, 1997, 1998 and 1999 of $500,000, 
$1,000,000 and $1,500,000, respectively, if the Company achieved a compounded 
growth rate in gross revenue of 20% for each year from 1997 through 1999 and 
if the Company was within 

                                     34

<PAGE>

75% of the growth target for new unit openings in the business plan 
established by the Board of Directors for the Company. Although the Company 
did not meet the performance criteria for the year ended December 31, 1997, 
the Board of Directors of the Company and the Compensation Committee 
determined that 200,000 shares would be exercisable as of December 31, 1997, 
pursuant to the option granted to Mr. Steinbrueck. The options expire on 
December 31, 2002, if not previously exercised. The remaining 450,000 options 
were cancelled upon Mr. Steinbrueck's departure.

         The Agreement provides that Mr. Steinbrueck will not compete with 
the Company during the term of the Agreement and for a period of two years 
following the termination thereof.

         On January 20, 1997, the Company sold 190,476 shares of the 
Company's common stock to Mr. Steinbrueck for a total of $250,000.

         On January 30, 1998, the Company entered into an Employment 
Agreement with Gary L. Wofford pursuant to which the Company employed Mr. 
Wofford as Vice President of System Sales and Support. Upon Mr. Wofford's 
resignation in September 1998, the Company began paying Mr. Wofford under the 
Employee Agreement and payments will continue through September 1999 at his 
then current annual salary of $97,500.

         The Employment Agreement provided that Mr. Wofford will not compete 
with the Company during the term of the Employment Agreement and for a period 
of two years following the termination thereof.



                                      35

<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

         (a)      (3)      LIST OF EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B.
                           -------------------------------------------------------
         <S>      <C>      <C>
         3.       Articles of Incorporation and Bylaws.

                  (a)      Bylaws, as amended through March 4, 1991,
                           incorporated by reference to the Annual Report on
                           Form 10-KSB for the fiscal year ended December 31,
                           1992.

                  (b)      Restated Articles of Incorporation, filed November 1,
                           1991, incorporated by reference to the Annual Report
                           on Form 10-K for the fiscal year ended December 31,
                           1991.

                  (c)      Articles of Amendment to Articles of Incorporation
                           filed June 29, 1992 incorporated by reference to the
                           Annual Report on Form 10-KSB for the fiscal year
                           ended December 31, 1992.

                  (d)      Articles of Amendment to the Articles of
                           Incorporation filed August 15, 1996, incorporated by
                           reference to the Quarterly Report on Form 10-QSB for
                           the quarter ended June 30, 1996.

         4.       Instruments Defining the Rights of Holders Including Indentures.

                  (a)      Statement of Designation, Voting Powers, Preferences,
                           and Rights of the Series C Preferred stock of Grease
                           Monkey Holding Corporation incorporated by reference
                           to the Annual Report on Form 10-KSB for the fiscal
                           year ended December 31, 1993.

         10.      Material Contracts.

                  (a)      1986 Incentive Stock Option Plan, incorporated by
                           reference to the Annual Report on Form 10-KSB for the
                           fiscal year ended December 31, 1993.

                  (b)      1993 Incentive Stock Option Plan, incorporated by
                           reference to the Annual Report on Form 10-KSB for the
                           fiscal year ended December 31, 1994.

                                        36

<PAGE>

                  (c)      Amendment to 1993 Incentive Stock Option Plan,
                           incorporated by reference to the Annual Report on
                           Form 10-KSB for the fiscal year ended December 31,
                           1996.

                  (d)      1994 Stock Incentive Plan, incorporated by reference
                           to the Annual Report on Form 10-KSB for the fiscal
                           year ended December 31, 1994.

                  (e)      Amendment to 1994 Stock Incentive Plan, incorporated
                           by reference to the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996.

                  (f)      Sublease Agreement dated April 9, 1998, between
                           Wells Fargo Bank, N.A. and Grease Monkey
                           International, Inc.

                  (g)      Current form of Grease Monkey Franchise Agreement
                           currently in effect, incorporated by reference to the
                           Annual Report on Form 10-KSB for the fiscal year
                           ended December 31, 1997.

                  (h)      Mobil Oil Company Supply Contract dated February 24,
                           1993, for Center #234 (similar contract form used for
                           all centers), incorporated by reference to Annual
                           Report on Form 10-KSB for the fiscal year ended
                           December 31, 1992.

                  (i)      Business Loan Agreement with Bank of America for
                           $2,000,000 three year line of credit, incorporated by
                           reference to the Annual Report on Form 10-KSB for the
                           fiscal year ended December 31, 1996.

                  (j)      Consultant Agreement between Grease Monkey Holding
                           Corporation and Rex L. Utsler, incorporated by
                           reference to the Annual Report on Form 10-KSB for the
                           fiscal year ended December 31, 1996.

                  (k)      Amendment to Consultant Agreement between Grease Monkey
                           Holding Corporation and Rex L. Utsler.

                  (l)      $5,000,000 Loan Agreement with Citicorp Leasing,
                           Inc., incorporated by reference to the Quarterly
                           Report on Form 10-QSB for the period ended September
                           30, 1997.

                                     37

<PAGE>

                  (m)      Master Supply Contract dated September 29, 1997, with
                           Mobil Oil Corporation, incorporated by reference to
                           the Annual Report on Form 10-KSB for the fiscal year
                           ended December 31, 1997.

                  (n)      Employment Agreement dated March 12, 1998, with
                           Charles E. Steinbrueck, incorporated by reference to
                           the Annual Report on Form 10-KSB for the fiscal year
                           ended December 31, 1997.

                  (o)      Employment Agreement dated January 30, 1998, with
                           Gary L. Wofford, incorporated by reference to the
                           Annual Report on Form 10-KSB for the fiscal year
                           ended December 31, 1997.

                  (p)      Master Franchise Agreement for the Republic of
                           Mexico, incorporated by reference to the Quarterly
                           Report on Form 10-QSB for the quarter ended September
                           30, 1998.

                  (q)      Agreement and Plan of Merger among Grease Monkey
                           Holding Corporation and QL 3000, Inc. dated March 26,
                           1999, incorporated by reference to the Current Report
                           on Form 8-K dated March 26, 1999.

                  (r)      Form of warrants issued to related parties.

         21.      Subsidiaries of the Registrant

                  (a)      Grease Monkey International, Inc., incorporated in
                           the State of Colorado (100% owned).

                  (b)      GM Properties, Inc., incorporated in the State of
                           Colorado (100% owned).

                  (c)      Grease Monkey de Mexico SA de CV., incorporated in
                           Mexico (100% owned).

         23.      Consent of Experts and Counsel

                  (a)      Consent of KPMG LLP.

         27.      Financial Data Schedule - 1998.

</TABLE>

                                      38
<PAGE>

(b)      REPORTS ON FORM 8-K.

         No Reports on Form 8-K were filed during the last quarter of the period
         covered by this report.




                                      39

<PAGE>

                                  SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

         Dated:  April 15, 1999

                           GREASE MONKEY HOLDING CORPORATION,
                           a Utah corporation

                           By: /s/ Rex L. Utsler
                               --------------------------------------------
                               Rex L. Utsler, President and Chief Operating 
                               Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>

     Date                   Name and Title                   Signature
--------------        ---------------------------     ----------------------
<S>                   <C>                             <C>
April 15, 1999        REX L. UTSLER, President         /s/ Rex L. Utsler
                      and Chief Operating Officer     --------------------------
                      (Principal Executive Officer,    Rex L. Utsler
                      Chief Financial Officer and
                      Principal Accounting Officer)

April 15, 1999        JAMES B. WALLACE, Director,      /s/ James B. Wallace
                      Chairman of the Board and       --------------------------
                      Chief Executive Officer          James B. Wallace

April 15, 1999        JERRY D. ARMSTRONG, Director     /s/ Jerry D. Armstrong
                                                      --------------------------
                                                       Jerry D. Armstrong

April 15, 1999        JIM D. BALDWIN, Director         /s/ Jim D. Baldwin
                                                      --------------------------
                                                       Jim D. Baldwin

April 15, 1999        CORTLANDT S. DIETLER, Director   /s/ Cortlandt S. Dietler
                                                      --------------------------
                                                       Cortlandt S. Dietler

April 15, 1999        WAYNE H. PATTERSON, Director     /s/ Wayne H. Patterson
                                                      --------------------------
                                                       Wayne H. Patterson

April 15, 1999        GEORGE F. WOOD, Director         /s/ George F. Wood
                                                      --------------------------
                                                       George F. Wood

</TABLE>

                                      40

<PAGE>

                        INDEPENDENT AUDITORS' REPORT


THE BOARD OF DIRECTORS AND STOCKHOLDERS
GREASE MONKEY HOLDING CORPORATION:


We have audited the accompanying consolidated balance sheets of Grease Monkey
Holding Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Grease Monkey
Holding Corporation and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.



                                             KPMG LLP

Denver, Colorado
March 15, 1999,
except as to Note K, which
is as of March 27, 1999

                                       F-1

<PAGE>

              GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEETS

                                      ASSETS

<TABLE>
<CAPTION>

                                                                                                  DECEMBER 31,
                                                                                     ------------------------------------
                                                                                          1998                   1997
                                                                                     -------------            -----------
<S>                                                                                  <C>                     <C>
Current Assets:
  Cash......................................................................           $   145,470               182,214
  Accounts receivable, net of allowance for doubtful
    accounts of $471,571 in 1998 and $478,553 in 1997 .......................              742,169             1,212,014
  Current portion of notes receivable, net (Note D) .........................               60,885               318,658
  Current portion of net investment in direct financing
    leases (Note F) .........................................................              183,775               204,921
  Inventories ...............................................................              647,530               758,116
  Prepaid expenses and supplies .............................................              219,635               113,648
                                                                                       -----------           -----------
  TOTAL CURRENT ASSETS ......................................................            1,999,464             2,789,571
                                                                                       -----------           -----------
Property and Equipment, (Notes E and F):
  Land ......................................................................              805,432               543,838
  Buildings (including buildings under capital leases) ......................            6,859,365             6,430,000
  Furniture and fixtures ....................................................              674,553               536,329
  Leasehold improvements ....................................................              823,657               718,672
  Machinery and equipment ...................................................            1,883,693             1,774,196
                                                                                       -----------           -----------
                                                                                        11,046,700            10,003,035
  Less accumulated depreciation .............................................           (4,508,081)           (3,985,940)
                                                                                       -----------           -----------
  NET PROPERTY AND EQUIPMENT ................................................            6,538,619             6,017,095
                                                                                       -----------           -----------
Other Assets:
  Net investment in direct financing leases (Note F) ........................            2,023,193             3,154,581
  Notes receivable, net (Note D) ............................................               81,919               225,177
  Deferred franchising costs ................................................              113,819               189,528
  Goodwill and covenants not to compete, net of accumulated
    amortization of $1,373,453 in 1998 and $1,215,026 in
    1997 ....................................................................            2,322,422             2,688,103
  Land held for development/resale ..........................................              818,300                  --
  Other assets, net of accumulated amortization of $70,126 in
    1998 and $167,145 in 1997 ...............................................              314,528               333,795
                                                                                       -----------           -----------
    TOTAL OTHER ASSETS                                                                   5,674,181             6,591,184
                                                                                       -----------           -----------
                                                                                       $14,212,264            15,397,850
                                                                                       ===========           ===========

</TABLE>

                            (continued on next page)

                                      F-2

<PAGE>

               GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31,
                                                                        -----------------------------------
                                                                            1998                    1997
                                                                        -----------              ----------
<S>                                                                     <C>                      <C>
Current Liabilities:
  Accounts payable ...........................................          $  1,674,175              1,400,633
  Accrued salaries and wages .................................               190,982                195,787
  Other accrued liabilities ..................................               377,799                371,143
  Current portion of long-term obligations (Note E) ..........             1,084,617                715,289
  Current portion of obligations under capital leases (Note F)               479,844                464,955
                                                                        ------------             ----------
    TOTAL CURRENT LIABILITIES ................................             3,807,417              3,147,807
                                                                        ------------             ----------
Long-Term Obligations (Note E) ...............................             5,418,008              3,800,082

Obligations Under Capital Leases (Note F) ....................             5,801,910              6,848,249

Deferred Franchise Sales Revenue .............................               467,253                985,470

Stockholders' Equity (Deficit) (Note G):
  Series C Preferred stock, stated value of $100.00 per
    share, 20,896 shares issued and outstanding in 1998 and
    1997 .....................................................             2,089,638              2,089,638
  Common stock, par value $0.03, 20,000,000 shares
    authorized, 4,647,880, and 4,633,570 shares issued and
    outstanding in 1998 and 1997, respectively ...............               139,436                139,007
  Capital in excess of par value .............................             6,328,733              6,197,880
  Accumulated deficit ........................................            (9,840,131)            (7,810,283)
                                                                        ------------             ----------
    TOTAL STOCKHOLDERS' EQUITY (DEFICIT) .....................            (1,282,324)               616,242

Commitments and Contingencies (Notes F and J).................
                                                                        ------------             ----------
                                                                        $ 14,212,264             15,397,850
                                                                        ============             ==========

</TABLE>

                See notes to the consolidated financial statements

                                       F-3

<PAGE>

                GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                            YEARS ENDED DECEMBER 31,
                                                                              ---------------------------------------------------
                                                                                 1998                1997                1996
                                                                              -----------         -----------         -----------
<S>                                                                          <C>                  <C>                 <C>
Operating Revenue:
  Royalty fees .......................................................       $  2,981,454           3,454,238           3,143,933
  Franchise sales - center openings ..................................            372,690             257,401             183,300
  Product and equipment revenue ......................................            658,048             777,285             776,333
  Sales by Company-owned Centers .....................................         14,885,285          14,742,786          14,416,201
  Leasing revenue ....................................................          1,100,214           1,547,876           1,434,086
  Other ..............................................................            103,894             389,728             188,940
                                                                              -----------         -----------         -----------
                                                                               20,101,585          21,169,314          20,142,793
                                                                              -----------         -----------         -----------
Operating Expenses:
  Franchise costs - center openings ..................................             88,243              85,822              32,843
  Product and equipment costs ........................................            286,273             316,926             340,300
  Company-owned Centers ..............................................         12,511,322          12,690,085          12,404,772
  Leasing expense ....................................................          1,282,530           1,549,315           1,376,677
  General and administrative expenses (Note H) .......................          5,597,932           5,382,473           4,740,381
  Provision for credit losses ........................................            310,708             253,368             206,221
  Depreciation .......................................................            723,115             688,041             694,241
  Amortization .......................................................            289,829             284,689             245,454
                                                                              -----------         -----------         -----------
                                                                               21,089,952          21,250,719          20,040,889
                                                                              -----------         -----------         -----------
Operating income (loss) ..............................................           (988,367)            (81,405)            101,904
                                                                              -----------         -----------         -----------
Other income (expense):
  Loss on sale/disposition/closure of centers ........................           (444,725)           (368,169)            (83,780)
  Undeveloped franchise licenses canceled ............................            202,491                --                27,563
  Interest income ....................................................             27,938              65,659              37,186
  Interest expense (Note F) ..........................................           (827,185)           (774,671)           (659,996)
                                                                              -----------         -----------         -----------
                                                                               (1,041,481)         (1,077,181)           (679,027)
                                                                              -----------         -----------         -----------
Net loss.............................................................        $ (2,029,848)         (1,158,586)           (577,123)
                                                                              ===========         ===========         ===========
Loss per common share (Note B).......................................        $      (0.46)              (0.28)              (0.16)
                                                                              ===========         ===========         ===========
Weighted average shares outstanding ..................................          4,646,255           4,594,083           4,361,163
                                                                              ===========         ===========         ===========

</TABLE>

                 See notes to the consolidated financial statements

                                       F-4

<PAGE>

               GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>

                                          Preferred Stock                     Common Stock
                                        ---------------------      -----------------------------------
                                                                                            Capital in
                                        Number of                  Number of                 Excess of     Accumulated
                                         Shares        Amount       Shares        Amount     Par Value       Deficit       Total
                                        ---------    ---------     --------      --------    ---------     ----------    ---------
<S>                                     <C>          <C>           <C>          <C>          <C>           <C>           <C>
Balance at December 31, 1995 .........    20,958     $2,095,838     4,336,764    $ 130,103    5,773,248    (6,074,574)   1,924,615
Issuance of common stock pursuant to
  employee benefit plan ..............       --           --           40,616        1,219       45,025          --         46,244
Conversion of Series C Preferred stock
  to common stock, including payment
  of accumulated dividends ...........       (62)        (6,200)        2,480           74        5,397          --           (729)
Increase in fair value of warrants 
  extended ...........................       --           --             --           --         54,000          --         54,000
Net loss .............................       --           --             --           --           --       (577,123)     (577,123)
                                        ---------     ----------    ---------    ---------    ---------    ----------     --------
Balance at December 31, 1996 .........    20,896      2,089,638     4,379,860      131,396    5,877,670   (6,651,697)    1,447,007
Issuance of common stock pursuant to
  employee benefit plan ..............       --           --           33,234          996       44,262          --         45,258
Issuance of common stock upon
  exercise of employee stock options .       --           --           30,000          900       31,663          --         32,563
Issuance of common stock .............       --           --          190,476        5,715      244,285          --        250,000
Net loss .............................       --           --             --           --           --     (1,158,586)   (1,158,586)
                                        ---------     ----------    ---------     ---------    ---------   ----------   ----------
Balance at December 31, 1997 .........    20,896      2,089,638     4,633,570      139,007    6,197,880   (7,810,283)      616,242
Issuance of common stock pursuant to
  employee benefit plan ..............       --           --           10,810          324       13,145         --          13,469
Issuance of common stock upon
  exercise of employee stock options .       --           --            3,500          105        1,708         --           1,813
Fair value of warrants issued ........       --           --             --           --        116,000         --         116,000
Net loss .............................       --           --             --           --           --     (2,029,848)   (2,029,848)
                                        ---------     ----------     --------     ---------    ---------  ----------    ----------
Balance at December 31, 1998 .........    20,896     $2,089,638     4,647,880    $ 139,436    6,328,733   (9,840,131)   (1,282,324)
                                        =========    ===========    =========     =========    =========  ==========    ==========
</TABLE>

                 See notes to the consolidated financial statements

                                      F-5

<PAGE>

               GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                    YEARS ENDED DECEMBER 31,
                                                     ----------------------------------------------------
                                                         1998                1997                 1996
                                                     -----------          -----------          ----------
<S>                                                  <C>                  <C>                  <C>
Cash flows from operating activities:
  Net loss .......................................   $(2,029,848)         (1,158,586)           (577,123)
  Adjustments to reconcile net loss to net cash
  provided by operating activities:
    Increase in deferred franchise sales
      revenue ....................................       140,000             374,500             541,400
    Franchise sales revenue recognized -
      center openings ............................      (372,690)           (257,401)           (183,300)
    Increase in deferred franchising costs .......       (58,536)            (75,176)           (111,141)
    Franchise costs recognized - center
      openings ...................................        74,321              85,822              32,843
    Provision for credit losses ..................       310,708             253,368             206,221
    Loss realized on sale/retirement of
      property and equipment .....................        14,336             105,132               1,110
    Depreciation and amortization ................     1,012,944             972,730             939,695
    Loss on sale/disposition/closure of centers ..       107,266             327,850              58,421
    Impairment of Asset Values ...................       723,726              26,400                --
    Accrual of Consultant Agreement/
      Severance Agreements .......................       240,763             357,113                --
    Undeveloped franchise licenses canceled ......      (202,491)               --               (27,563)
    Fair value of warrants issued/extended .......        21,341                --                54,000
    Other, net ...................................        84,861              (6,099)                380

    Net change in operating assets and
      liabilities:
      Decrease (increase) in accounts
        receivable ...............................        20,161            (582,461)           (448,549)
      Decrease in notes receivable ...............        53,457              76,799               8,456
      Decrease (increase) in inventories .........       107,587             104,109            (153,658)
      Decrease (increase) in prepaid expenses
        and supplies .............................       (24,622)             11,560              30,453
      Increase (decrease) in accounts payable ....       (53,750)            260,656             273,797
      Increase in accrued salaries and wages
        and other accrued liabilities ............        11,239              55,591             129,666
                                                     -----------         -----------         -----------
        Net cash provided by operating ...........   $   180,773             931,907             775,108
          activities                                 -----------         -----------         -----------

</TABLE>

                            (Continued on next page)

                                      F-6

<PAGE>

                GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                        YEARS ENDED DECEMBER 31,
                                                         --------------------------------------------------------
                                                            1998                   1997                  1996
                                                         -----------           -----------            -----------
<S>                                                      <C>                   <C>                   <C>
Cash flows from investing activities:
  Principal receipts on direct financing leases .....    $   169,562               189,926               177,656
  Acquisition of centers ............................           --                (688,191)             (394,389)
  Proceeds from sale of centers .....................        115,450               116,901                75,354
  Purchase of property and equipment ................       (404,570)             (297,570)             (724,861)
  Notes receivable from developers ..................        190,000               225,000              (415,000)
  Increase in projects in development ...............     (1,594,658)              (41,302)                 --
  Decrease (increase) in other assets ...............       (294,866)             (219,237)               29,247
                                                         -----------           -----------           -----------
    Net cash used in investing activities ...........     (1,819,082)             (714,473)           (1,251,993)
                                                         -----------           -----------           -----------
Cash flows from financing activities:
  Proceeds from long-term obligations ...............      2,683,100             3,045,000             1,257,000
  Principal payments on long-term obligations .......       (666,293)           (3,316,796)             (493,249)
  Principal payments on capital lease
  obligations .......................................       (439,362)             (409,115)             (348,365)
  Issuance of common stock ..........................          1,814               282,563                  --
  Payment of accumulated dividends upon
    conversion of preferred stock to common
    stock ...........................................           --                    --                    (729)
  Decrease (increase) in restricted cash ............           --                  34,927                (2,694)
  Increase in lease deposit obligations .............         22,306                 3,456                 4,500
                                                         -----------           -----------           -----------
    Net cash provided by (used in)
      financing activities ..........................      1,601,565              (359,965)              416,463
                                                         -----------           -----------           -----------
Net decrease in cash ................................        (36,744)             (142,531)              (60,422)
Cash, beginning of year .............................        182,214               324,745               385,167
                                                         -----------           -----------           -----------
Cash, end of year ...................................    $   145,470               182,214               324,745
                                                         ===========           ===========           ===========
Supplemental disclosures of cash flow
  information -
    Cash paid during the year for interest ..........    $ 1,290,328             1,226,054             1,066,840
                                                         ===========           ===========           ===========
</TABLE>

               See notes to the consolidated financial statements

                                     F-7

<PAGE>

GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.       DESCRIPTION OF BUSINESS

         Grease Monkey Holding Corporation ("GMHC") or ("the Company") operates,
leases, manages and franchises automotive quick-service preventive fluid
maintenance Centers (Grease Monkey Centers or Centers). Grease Monkey Centers
provide the automobile user with convenient preventive fluid maintenance
services. Grease Monkey service technicians change the oil, install a new oil
filter, lubricate the chassis, adjust tire pressure, wash windows and vacuum the
interior of an automobile. At the same time, all fluid levels are checked and
topped off if necessary. Grease Monkey Centers also offer transmission fluid
changes, differential fluid changes, radiator flushes, air conditioning
recharges, automotive light bulb replacement, and oil additive packages, and
will replace air filters and install new wiper blades.

         The principal markets in which Grease Monkey or its franchisees operate
include twenty-nine states and Mexico with concentrations in Arizona,
California, Colorado, Iowa, Indiana, North Carolina, New Jersey, Ohio,
Pennsylvania, South Carolina, Virginia and Washington.

         The following table summarizes the number of Grease Monkey Centers in
operation at the end of the last three fiscal years:

<TABLE>
<CAPTION>

                                                    December 31,
                                               ----------------------
                                               1998     1997     1996
                                               ----     ----     ----
<S>                                            <C>      <C>      <C>
 Franchised Grease Monkey Centers ........      182      187      184

 Company-owned Grease Monkey Centers .....       33       31       31
                                               ----     ----     ----
 Total Grease Monkey Centers in operation
 at year end .............................      215      218      215
                                               ====     ====     ====
</TABLE>

Included in Franchised Grease Monkey Centers are twenty-six Centers in 1998,
twenty-one Centers in 1997 and twenty Centers in 1996 located in Mexico. The
twenty-six Centers open at the end of 1998 are operating under a Master
Franchise Agreement for the Republic of Mexico.

                                     F-8
<PAGE>

B.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION -- The consolidated financial statements 
include the accounts of Grease Monkey Holding Corporation and its 
wholly-owned subsidiaries. All significant intercompany balances and 
transactions have been eliminated.

         LIQUIDITY - The Company has incurred losses from operations that 
have increased over the past three years coupled with a decrease in cash flow 
from operations for the same period. As of December 31, 1998, the Company had 
a working capital deficit of $1,807,953 and total liabilities exceeded total 
assets. These factors among others may indicate that the Company may not be 
able to meet its obligations in a timely manner without increased cash flow 
from operations, sale of non-producing assets or additional financing.

         The Company has taken steps to reduce losses and generate cash flow 
from operations and anticipates the sale of non-producing assets which will 
generate sufficient cash flow to meet its obligations in a timely manner. 
Should the Company be unable to achieve its projected level of cash flow from 
operations or sell its non-producing assets, additional financing could be 
necessary. The Company has entered into a merger agreement (see Note K) that 
would result in the sale of the Company. As a result of the current merger 
agreement, the Company is not actively investigating financing alternatives. 
Should the merger not proceed, the Company believes it could obtain 
additional financing, however, there can be no assurance that such financing 
would be available on a timely basis or on acceptable terms.

         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 revenue and 
expenses during the reporting period. Actual results could differ from those 
estimates.

         INVENTORIES - Inventories are stated at the lower of cost, 
determined by the first-in, first-out (FIFO) method, or market. Inventories 
consist primarily of automotive service products and promotional materials.

         NET INVESTMENT IN DIRECT FINANCING LEASES AND OBLIGATIONS UNDER 
CAPITAL LEASES - The Company has entered into leasing arrangements with 
franchisees of Grease Monkey Centers. In some cases, the Company leases the 
property from an outside party and, in turn, sublets the property to the 
franchisee. Certain of these leases and subleases meet the criteria of 
capitalized leases and direct financing leases. In addition, the Company 
leases buildings at certain Company-owned Grease Monkey Centers. Certain of 
these leases are capital leases. Capital leases are recorded at the lesser of 
the building's fair market value at the inception of the lease or the net 
present value of the minimum lease payments.

                                   F-9

<PAGE>

B.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         PROPERTY AND EQUIPMENT - Property and equipment are stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization
are computed using the straight-line method over the following estimated useful
lives:

<TABLE>

 <S>                              <C>
 Buildings accounted for as
   capitalized leases ........    term of the lease (generally 15 to 20 years)

 Buildings ...................    20 years

 Furniture and Fixtures ......    10 years

 Leasehold improvements ......    term of the lease (generally 15 to 20 years)

 Machinery and equipment .....    3 to 10 years

</TABLE>

         INTANGIBLE ASSETS - The cost of Grease Monkey Centers acquired in 
excess of the fair value of tangible assets acquired at the date of 
acquisition is recorded as goodwill and covenants not to compete. Goodwill is 
amortized on a straight-line basis over the remaining term of the underlying 
lease (15-20 years). The covenants not to compete are amortized on a 
straight-line basis over the period of the agreements.

         IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED 
OF - The Company accounts for long-lived assets in accordance with the 
provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED 
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This Statement requires 
that long-lived assets and certain identifiable intangibles be reviewed for 
impairment whenever events or changes in circumstances indicate that the 
carrying amount of an asset may not be recoverable. Recoverability of assets 
to be held and used is measured by a comparison of the carrying amount of an 
asset to future net cash flows expected to be generated by the asset. If such 
assets are considered to be impaired, the impairment to be recognized is 
measured by the amount by which the carrying amount of the assets exceed the 
fair value of the assets. Assets to be disposed of are reported at the lower 
of the carrying amount of fair value less costs to sell.

         MARKETING COSTS - The Company participates in various advertising 
and marketing programs, individually and in conjunction with product 
suppliers. Certain of the Company's costs incurred in connection with these 
programs are reimbursed. All costs related to marketing and advertising are 
expensed in the period incurred.

         DEVELOPMENT FEES, INITIAL FRANCHISE FEES AND RELATED FRANCHISE
COSTS - Development fees and franchise fees are deferred and recognized as 
franchise sales when the Grease Monkey Centers open or the right to open has 
been terminated. Incremental development costs are deferred, but not in 
excess of the deferred revenue, net of the estimated cost to open the Grease 
Monkey Center, and are expensed when the corresponding revenue is recognized.

         ROYALTY FEES - Royalties as allowed by the franchise agreement are 
accrued on a percentage of sales (ranging from 3% to 5%) as reported by 
franchisees.

                                 F-10

<PAGE>

B.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Based upon many factors, including the age of amounts owed the 
Company, the extent of collateralization, and historical performance, the 
Company may place certain financially troubled franchisees on a non-accrual 
status. During 1998, approximately $229,000 ($147,000 in 1997 and $112,000 in 
1996) in estimated royalty revenue was not recognized as a result of the 
non-accrual policy. The Company actively pursues collection of all 
receivables, including receivables that are not recognized as income until 
collected.

         ALLOWANCE FOR DOUBTFUL ACCOUNTS - The allowance for doubtful 
accounts is maintained at amounts the Company deems adequate to cover 
estimated losses on accounts and notes receivable. In determining the level 
to be maintained, the Company evaluates many factors including the 
franchisees' ability to pay, historical performance, the collateral value of 
the franchisees' Centers and any undeveloped franchises owned by the 
franchisee, and prevailing and anticipated economic conditions.

         COMPANY-OWNED CENTERS - At December 31, 1998, the Company owned 33 
Grease Monkey Centers. The combined revenue and expenses (excluding 
depreciation, amortization and interest expense) for those Grease Monkey 
Centers operated by the Company are reported on the Consolidated Statements 
of Operations as Company-owned Centers.

         INCOME TAXES - The Company accounts for income taxes in accordance 
with Statement of Financial Accounting Standards SFAS No. 109, ACCOUNTING FOR 
INCOME TAXES (SFAS No. 109). Under the asset and liability method of SFAS No. 
109, deferred tax assets and liabilities are recognized for the future tax 
consequences attributable to differences between the financial statement 
carrying amounts of existing assets and liabilities and their respective tax 
bases. Deferred tax assets and liabilities are measured using enacted tax 
rates expected to apply to taxable income in the years in which those 
temporary differences are expected to be recovered or settled. Under SFAS No. 
109, the effect on deferred tax assets and liabilities of a change in tax 
rates is recognized in income in the period that includes the enactment date.

         STOCK OPTION PLANS - The Company accounts for its stock option plans 
in accordance with the provisions of Accounting Principles Board ("APB") 
Opinion No. 25, Accounting for Stock Issued to Employees, and related 
interpretations. As such, compensation expense was recorded on the date of 
grant only if the current market price of the underlying stock exceeded the 
exercise price. The Company adopted the disclosure requirement of SFAS No. 
123, Accounting for Stock-Based Compensation and provides pro forma net 
income (loss) and pro forma earnings (loss) per share disclosures for 
employee stock option grants made in 1995 and future years as if the 
fair-value-based method defined in SFAS No. 123 had been applied.

         LOSS PER COMMON SHARE - Loss per common share is computed by 
dividing the net loss after reduction for dividends on preferred stock 
($125,378 in 1998 and 1997 and $125,766 in 1996) by the weighted average 
number of common shares outstanding during each period. The effects of 
potentially dilutive stock options and convertible securities outstanding 
were antidilutive in 1998, 1997 and 1996.

         RECLASSIFICATIONS - Certain amounts in the prior year financial 
statements have been reclassed to conform to the presentation adopted in the 
current year.

                                   F-11

<PAGE>

C.       ACQUISITIONS

         During 1998, the Company acquired three Grease Monkey Centers from 
franchisees. The Company foreclosed on amounts due the Company and assumed 
liabilities resulting in total consideration of $96,502 for the Centers.

         During 1997, the Company acquired three Grease Monkey Centers from 
franchisees. The Company paid cash and assumed liabilities for total 
consideration of $1,077,456 for the Centers.

         During 1996, the Company acquired seven Grease Monkey Centers from 
franchisees (five foreclosed Centers and two purchased Centers). The Company 
foreclosed on amounts due the Company, received a note receivable and assumed 
liabilities resulting in total consideration of $260,158 for the five 
foreclosed Centers, and paid cash and assumed liabilities for total 
consideration of $1,604,521 for the two purchased Centers.

         The results of operations of the Grease Monkey Centers acquired are 
included in the accompanying Consolidated Financial Statements from the date 
of acquisition. All acquisitions were recorded under the purchase method of 
acquisition accounting.





                                    F-12

<PAGE>

D.       NOTES RECEIVABLE

Notes receivable consist of the following:

<TABLE>
<CAPTION>

                                                                                             DECEMBER 31,
                                                                                 ---------------------------------
                                                                                      1998                 1997
                                                                                 --------------       ------------
<S>                                                                             <C>                  <C>
Notes receivable from franchisees. Interest rates ranging from 6% to 10% at
  December 31, 1998. Due in monthly installments of approximately $7,700
  including interest (maturities range through February 2006). Generally
  collateralized by franchise rights, property and equipment of Grease Monkey
  Centers, and undeveloped licenses............................................  $     90,296             354,694
Notes receivable from franchisees.  Interest rates ranging from 6% to 10% at 
  December 31, 1998.  Due in  monthly installments of approximately $8,000
  (maturities range through February 2013).  Unsecured.........................       114,365              92,339
Notes receivable from developers.  Interest at 9.04%.
  Monthly payments of interest only, with principal
  due April 1998...............................................................         -                 190,000
Other notes receivable. Interest rates at 7% at December 31, 1998
  (maturities range through February 2006).....................................        91,755             141,399
                                                                                -------------        ------------
                                                                                      296,416             778,432
Less allowance for uncollectible amounts..............................               (153,612)           (234,597)
Less current portion..................................................                (60,885)           (318,658)
                                                                                --------------       ------------
                                                                                 $     81,919             225,177
                                                                                ==============       ============

</TABLE>

Maturities of notes receivable (excluding the allowance for uncollectible
amounts) are as follows:

<TABLE>
<CAPTION>

 Years Ended
 December 31,
 ------------
 <S>                                         <C>
 1999  .................................     $   100,056
 2000  .................................          36,895
 2001  .................................          25,274
 2002  .................................          24,388
 2003  .................................          35,327
 Thereafter ............................          74,476
                                             -----------
                                             $   296,416
                                             ===========
</TABLE>

                                     F-13

<PAGE>

E.       LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

<TABLE>
<CAPTION>

                                                                                                DECEMBER 31,
                                                                                       ------------------------------
                                                                                          1998                 1997
                                                                                       ----------           ---------
<S>                                                                                   <C>                  <C>
Notes payable under an aggregate line of credit of $5,000,000 with interest
  rates ranging from 8.04% - 9.26% plus guarantee fees, maturing at various
  times through August 2007 with options to extend original maturities for
  additional five-year terms under an increased guarantee fee. Guaranteed by a
  motor oil supplier with a related Master Supply Contract......................      $  4,532,831          2,579,775
Notes payable to oil suppliers which are non-interest bearing
  and amortized based on product purchases, maturing at
  various times through August 2011, secured by lubrication
  equipment at Grease Monkey Centers ...........................................           305,288            303,607
Notes payable with interest rates ranging from 9.5% to 10%,
  maturing at various times through July 2011, secured by
  mortgages on real property ...................................................           328,288            377,686
Notes payable with interest rates ranging from 7.5% to
  11.5%, maturing at various times through April 2008,
  secured by assets at Grease Monkey Centers ...................................           600,696            648,786
Demand notes payable with interest ranging from 8.5% to
  8.75% guaranteed by or owed to a related party................................           484,500                  -
Notes payable under a line of credit of $2,000,000
  guaranteed by a motor oil supplier with interest at 9%
  (including a guarantee fee of 3.3%) expired in April 1998.....................                -             190,000
Note payable to a former executive with an imputed
  interest rate of 9%, cancelled September 1998.................................                -             230,639
Other long-term obligations.....................................................           251,022            184,878
                                                                                      -------------        -----------
                                                                                         6,502,625          4,515,371
Less current portion............................................................        (1,084,617)          (715,289)
                                                                                      -------------        -----------
                                                                                       $ 5,418,008          3,800,082
                                                                                      =============        ===========
</TABLE>

                                     F-14

<PAGE>

E.       LONG-TERM OBLIGATIONS (CONTINUED)

Aggregate contractual maturities of long-term obligations over the next five
years and thereafter are as follows:

<TABLE>

 <S>                               <C>
 1999 .......................      $ 1,084,617
 2000 .......................          511,361
 2001 .......................          561,100
 2002 .......................          598,439
 2003 .......................          729,429
 Thereafter .................        3,017,679
                                   -----------
                                   $ 6,502,625
                                   ===========

</TABLE>

F.       LEASES

         The Company leases certain Grease Monkey Center sites and office space
under operating lease agreements. Lease terms range from one to twenty years.
The Company pays the property taxes, insurance, and maintenance costs related to
the leased property where applicable. Rent expense under operating leases was
$2,424,957 for 1998, $2,565,414 for 1997, and $2,524,578 for 1996.

         The Company also leases additional Grease Monkey Center sites under
capital lease agreements. These sites are either sublet to franchisees or
operated as Company Centers. The typical lease period is 15 to 20 years and some
leases contain renewal options. These leases are accounted for as capital leases
and are capitalized using interest rates appropriate at the inception of each
lease.

         As lessor, the Company sublets 18 sites to franchisees and third
parties. The typical sublease period coincides with the primary lease term, and
some leases contain renewal options. The franchisees or tenants pay the property
taxes, insurance and maintenance costs related to the leased property. Certain
of the subleases are accounted for as direct financing leases. In those cases
where the Company subleases only land, or the lease or sublease does not meet
the criteria for capitalization, the sublease is accounted for as an operating
lease.

                                     F-15

<PAGE>

F.       LEASES (CONTINUED)

         Future minimum commitments under leasing arrangements for Grease Monkey
Centers at December 31, 1998, are as follows:

<TABLE>
<CAPTION>
                                                             Payable as Lessee                        Receivable as Lessor
                                                     ----------------------------------         -------------------------------
                Years Ended                            Capital                Operating          Capital              Operating
                December 31,                            Leases                 Leases            Leases                Leases
                -----------                            --------               --------          --------              ---------
<S>                                                  <C>                     <C>               <C>                   <C>
1999 ......................................          $ 1,163,170              1,958,882          392,180               724,257
2000 ......................................            1,188,684              1,908,745          426,178               740,375
2001 ......................................            1,199,170              1,814,279          420,851               701,006
2002 ......................................            1,157,669              1,769,391          375,570               628,537
2003 ......................................            1,151,478              1,702,958          385,250               579,910
Thereafter ................................            4,142,517              5,712,431        1,242,717             2,227,689
                                                     -----------             ----------      -----------            ----------
Total minimum commitments .................           10,002,688             14,866,686        3,242,746             5,601,774
                                                                             ==========                             ==========
Less portion representing interest ........           (3,720,934)                             (1,035,778)
                                                     -----------                             -----------
Present value of net minimum
 commitments ..............................            6,281,754                               2,206,968
Less current portion ......................             (479,844)                               (183,775)
                                                     -----------                             -----------
Non-current portion .......................           $5,801,910                               2,023,193
                                                     ===========                             ===========
</TABLE>

Amounts capitalized for Centers under capital leases are included in 
buildings (primarily representing Company Centers) and as the net investment 
in direct financing leases (representing centers subleased to franchisees). 
The following is a summary of Grease Monkey Centers under capital leases 
included in buildings:

<TABLE>
<CAPTION>

                                                          December 31,
                                                  ----------------------------
                                                     1998              1997
                                                  ----------         ---------
<S>                                              <C>               <C>
 Buildings ...................................   $  4,376,688        4,595,274
 Less accumulated depreciation ...............     (1,744,722)      (1,481,383)
                                                 ------------      -----------
                                                 $  2,631,966        3,113,891
                                                 ============      ===========
</TABLE>

         Interest expense attributable to leases for Centers sublet to
franchisees is included in leasing expense. Interest expense attributable to
capital leases of Company Centers ($369,119, $369,233, and $364,041 in 1998,
1997 and 1996, respectively) is included in interest expense.

                                    F-16

<PAGE>

G.       STOCKHOLDERS' EQUITY (DEFICIT)

COMMON AND PREFERRED STOCK

         On June 11, 1996, at the Annual Meeting of Shareholders, the Company's
shareholders voted to amend Article IV of the Company's Articles of
Incorporation to increase the authorized shares of common stock with a par value
of $0.03 per share to 20,000,000 shares.

         On January 20, 1997, Charles E. Steinbrueck, former President and Chief
Executive Officer, entered into an agreement to purchase 190,476 shares of
restricted common stock at a per share price of $1.3125, the last trade price on
January 20, 1997, for a total consideration of $250,000.

         The Company's Series C, 6% cumulative, Preferred stock is redeemable at
the option of the Company upon 60 days prior written notice. At the option of
the holder, at any time prior to the close of business on the redemption date,
each share of Series C Preferred stock, plus any accumulated unpaid dividends,
may be converted into shares of common stock at a conversion price of $2.50 per
share of common stock. During 1996, 62 shares of Series C Preferred stock were
converted into 2,480 shares of common stock. During 1997 and 1998, there were no
conversions of Preferred stock into common stock. As of December 31, 1998,
accumulated unpaid dividends totaled $632,324.

         During 1996, the Company extended the expiration date on warrants to 
purchase 500,000 shares of common stock to August 1998 as consideration for 
the warrant holders agreement to cooperate in an equity and debt financing 
then under consideration. The increase in the estimated fair value of the 
warrants of $54,000 was recorded as an increase in stockholder's equity and 
deferred offering costs. The offering costs were subsequently written off 
when the proposed financing was abandoned. The warrants expired unexercised 
on August 4, 1998.

         As compensation for a guarantee of a standby letter of credit by 
four principals of a related party in favor of the Company's landlord for its 
corporate office space, the Company issued warrants to purchase 400,000 
shares of its common stock for $1.05 per share. The warrants were issued in 
four 100,000 increments of which 200,000 were issued to director/shareholders 
of the Company and the other 200,000 to principal shareholders of the 
Company. The warrants expire on August 1, 2000. The fair value of the 
warrants of $116,000 was recorded as an increase in stockholder's equity and 
as an other asset which will be amortized over the term of the letter of 
credit which expires in February 2000.

         The Company has an employee deferred compensation 401(k) plan and 
matches employee contributions to this plan in an amount equal to 50% of the 
employees' contribution, up to a maximum of 6% of the employees' 
compensation. The Company's contribution is paid with its $0.03 par value 
common stock (net of forfeitures) valued at market on the date of the 
contribution. During 1998, 1997 and 1996, the Company contributed 10,810, 
33,234, and 40,616 shares to this plan at an average of $1.25, $1.36, and 
$1.14 per share, respectively.

                                    F-17

<PAGE>

G.       STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

STOCK COMPENSATION PLANS

         At December 31, 1998, the Company has three stock-based compensation
plans. Under the terms of the 1986 and 1993 Plans, the Company may grant
incentive stock options to officers and employees on terms and conditions
determined by the Option Committee. Options are granted at an exercise price
equal to market value on the date of the grant, are exercisable immediately,
expire five years from the date of grant and expire upon termination of
employment. The 1986 Plan reserved 66,667 shares and the 1993 Plan reserved
300,000 shares for grant under the Plan. No further options can be granted under
the 1986 Plan. Under the terms of the 1994 Plan, the Company may grant to
officers, directors, consultants and employees, on terms and conditions
determined by the Option Committee, incentive stock options, cash awards, stock
bonuses or stock appreciation rights. Options granted under the 1994 Plan cannot
be exercisable for more than ten years and the exercise price must be at least
100% of the fair market value of the Company's common stock on the date of the
grant. The 1994 Plan originally reserved 500,000 shares for grant or awards
under the Plan. In June 1997, the Company's shareholders approved an additional
500,000 shares.

         On January 20, 1997, five year options to purchase 650,000 shares of
the Company's common stock at $1.31 per share were granted to Charles E.
Steinbrueck, former President and Chief Executive Officer. These options vest
upon certain performance criteria being achieved and were not granted under the
Company's qualified stock option plans. At December 31, 1998, 200,000 of these
options had vested and are accounted for under a variable basis which requires
the options to be marked-to-market based on the market price of the Company's
common stock. As of December 31, 1998, the option price had been in excess of
the market price and as such, no compensation cost has been incurred. The
remaining options to purchase 450,000 shares were cancelled upon Mr.
Steinbrueck's departure.

         The Company applies APB Opinion No. 25 and the related 
Interpretations in accounting for its plans. Accordingly, no compensation 
cost has been recognized for its fixed stock option plans. Had compensation 
cost for the Company's stock-based compensation plans been determined 
consistent with FASB No. 123, the Company's net income (loss) and earnings 
(loss) per share would have been reduced to the proforma amounts indicated 
below:

<TABLE>
<CAPTION>

                                                                               1998                  1997                 1996
                                                                          -------------          ------------          -----------
 <S>                                     <C>                              <C>                    <C>                   <C>
 Net loss                                As Reported (net of
                                         preferred stock dividends)       $  (2,155,226)          (1,283,964)           (702,889)
                                         Pro forma                        $  (2,281,249)          (1,408,445)           (750,717)

 Loss per common share                   As Reported                      $       (0.46)               (0.28)              (0.16)
                                         Pro forma                        $       (0.49)               (0.31)              (0.17)

</TABLE>

                  The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1998 and 1997; no dividend
yield; expected volatility approximating 50%; risk free interest rate of
approximately 4 and 6 percent, respectively; and expected lives of five years.

                                     F-18

<PAGE>

G.       STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

         A summary of the status of the Company's three fixed stock option plans
as of December 31, 1998, 1997 and 1996, and changes during the years ended on
those dates is presented below:

<TABLE>
<CAPTION>

                                                                                   Shares             Weighted
                                                                                 Outstanding           Average
                                                                Shares               and              Exercise
                                                               Reserved          Exercisable            Price
                                                            ------------       --------------       -----------
<S>                                                         <C>                <C>                  <C>
Balances at December 31, 1995.....................               833,333            536,666           $  1.79
  Granted.........................................                     -            182,200              1.07
  Cancelled.......................................                     -            (52,633)             1.62
  Expired.........................................                  (133)                 -              -
                                                            ------------       ------------          ---------
Balances at December 31, 1996.....................               833,200            666,233              1.60
  Additional shares reserved......................               500,000                  -              -
  Granted.........................................                     -            100,000              1.31
  Exercised.......................................               (30,000)           (30,000)             1.09
  Cancelled.......................................                     -           (103,634)             1.75
  Expired.........................................               (10,000)                 -              -
                                                            ------------       ------------          ---------
Balances at December 31, 1997.....................             1,293,200            632,599              1.56
  Granted.........................................                     -            430,000              1.38
  Exercised.......................................                (3,500)            (3,500)             1.06
  Cancelled.......................................                     -           (204,833)             1.37
                                                            ------------       ------------          ---------
Balances at December 31, 1998.....................             1,289,700            854,266           $  1.51
                                                            ============       ============          =========

                                                                1998               1997
                                                            ------------       ------------
Weighted-average fair value of options
  granted during the year........................                  $0.47              $0.66

</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>

                                 Options Outstanding and Exercisable
                       --------------------------------------------------------
                                               Weighted-
                           Number               Average
                       Outstanding and         Remaining            Weighted-
 Range of              Exercisable at         Contractual            Average
 Exercise Prices          12/31/98                Life           Exercise Price
 ----------------      ---------------        ------------       --------------
 <S>                   <C>                    <C>                <C>
     $1.06 - 1.17            131,700           2.63 years               $1.07
      1.31 - 1.38            335,000           4.23 years                1.36
      1.59 - 1.75            317,566           1.57 years                1.71
             2.22             70,000           1.30 years                2.22
                            --------
      1.06 - 2.22            854,266           2.21 years                1.51
                            ========
</TABLE>

                                      F-19

<PAGE>

H.       GENERAL AND ADMINISTRATIVE EXPENSES

         The following is a summary of general and administrative expenses:

<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                           -------------------------------------------------------
                                                                 1998                 1997              1996
                                                           -----------------    ----------------    --------------
<S>                                                        <C>                   <C>                 <C>
Salaries, wages and personnel expenses..................    $ 2,121,976             2,213,725          2,007,997

Travel and entertainment expenses.......................        307,389               374,665            375,460

Office expenses.........................................        601,027               631,059            648,552

Franchise development and training expenses.............        163,372               121,467             48,555

Franchise sales and promotional expenses................         56,084                98,875             90,276

Terminated projects.....................................        367,156                12,644            206,469

Litigation, including legal fees and related costs......        246,587               137,612            344,139

Professional fees - legal, tax and accounting...........        261,281               233,910            145,733

Company-owned Centers division overhead.................        693,941               819,150            678,476

Loss on sale of assets/asset impairment.................         60,618                65,490              1,110

Consultant agreement/severance expenses.................        314,825               459,420               -

Other...................................................        403,676               214,456            193,614
                                                             ----------            ----------         ----------
  Total general and administrative expenses.............   $  5,597,932             5,382,473          4,740,381
                                                             ==========            ==========         ==========
</TABLE>

                                      F-20

<PAGE>

I.       INCOME TAXES

         In 1998, 1997 and 1996, the deferred tax benefit that otherwise 
would have been provided for was offset by an increase in the valuation 
allowance of $693,000, $447,000 and $184,000, respectively.

         The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997, are presented below:

<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                            --------------------------
                                                                               1998            1997
                                                                            ----------      -----------
<S>                                                                         <C>             <C>
Deferred tax assets:
Accounts and notes receivable, principally due to the allowance                                      
  for doubtful accounts...............................................      $    91,000        143,000
Property and equipment, principally due to differences in basis                                        
  and depreciation....................................................          664,000        630,000
Goodwill..............................................................          273,000        247,000
Deferred franchise sales revenue, due to deferral for financial                                        
  reporting purposes..................................................          175,000        370,000
Other.................................................................          307,000        211,000
Net operating loss carry-forwards.....................................        2,304,000      1,548,000
                                                                           ------------   ------------

         Total gross deferred tax assets..............................        3,814,000      3,149,000
Less valuation allowance..............................................       (3,771,000)    (3,078,000)
                                                                           ------------   ------------
         Net deferred tax assets......................................           43,000         71,000
                                                                           ------------   ------------
Deferred tax liabilities:
Deferred franchising costs, due to deferral for financial reporting                                    
  purposes............................................................          (43,000)       (71,000)
                                                                           ------------   ------------
         Total gross deferred tax liabilities.........................          (43,000)       (71,000)
                                                                           ------------   ------------
Net deferred tax liability............................................      $     -              -
                                                                           ============   ============

</TABLE>

         The valuation allowance as of December 31, 1998 and 1997 represents 
deferred tax assets that, based on the Company's earnings history and 
uncertainty regarding the timing of recognition, may not be realized.

         The Company has net operating loss carry-forwards at December 31, 1998,
of approximately $6,100,000 for income tax purposes. The net operating loss
carry-forwards expire between 2002 and 2013. As a result of change in control of
the Company in March of 1991, these net operating losses are restricted in their
use pursuant to the Internal Revenue Service Regulations.

                                     F-21

<PAGE>

I.       INCOME TAXES (CONTINUED)

         The Company had deducted approximately $1,692,000 related to the
exercise of non-qualified stock options from 1987 to 1989, which is included in
the net operating loss carry-forward for income tax purposes. If the $1,692,000
in deductions are realized, the tax benefit will be credited to capital in
excess of par value.

J.      COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

         On December 15, 1998, a demand for arbitration was made against the
Company by Navfam, Inc. based upon the Company's alleged breach of a Software
License Agreement dated April 7, 1998. That matter is governed by the American
Arbitration Association in Los Angeles, California, and has been assigned Case
No. 72Y1140138198. Unspecified damages have been claimed by Navfam, Inc. in
excess of $250,000. In response to the arbitration demand, the Company has
specifically denied Navfam, Inc.'s claim.

         On September 16, 1998, a lawsuit was filed against the Company by
Barrett Commercial, Inc. in the United States District Court for the Central
District of California, BARRETT COMMERCIAL, INC. V. GREASE MONKEY INTERNATIONAL,
INC., No. SACV 98-1123GLT(EEx). In that action, Barrett alleges the existence of
a contract with the Company to work as development partners in Southern
California for the purpose of building ten stores. Barrett claims
unsubstantiated losses of $1,300,000 for expenditures made in pursuing that
development which was never completed. Barrett claims the Company is in breach
of the alleged agreement as a result of its refusal to reimburse it for those
alleged expenditures.

         The Company has generally denied those claims and believes and has
asserted that they are frivolous and groundless. Barrett has been unable to
produce the alleged contract and the Company believes none was ever created. In
addition, the Company believes Barrett lacks any evidence to support his claim
of the alleged expenditures pursuant to the Southern California development. The
Company intends to defend vigorously said claims and its liability exposure at
the present time appears to be nominal. We believe the likelihood of an
unfavorable outcome in this matter is remote.

         The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the Company's consolidated financial position, results of operations or
liquidity.

FINANCIAL GUARANTEES

         The Company has guaranteed leases of four franchisees. At December 31,
1998, the aggregate contingent liability under the lease guarantees totaled
approximately $1,319,000. In addition, the Company has guaranteed notes payables
of two franchisees totaling approximately $750,000 and has guaranteed notes
payable to oil suppliers for certain franchisees.

         The Company is committed to the lease of office and training facilities
under a lease expiring in November 2008. Rent under the lease is approximately
$18,000 per month.

                                    F-22

<PAGE>

J.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

THE YEAR 2000 ISSUE

THE PROBLEM

         The Year 2000 issue is the result of the inability of hardware,
software and control systems to correctly identify two-digit references to
specific years, beginning with the Year 2000. This could result in system
failures or miscalculations causing disruptions of the Company's operations and
the Company's suppliers.

STATE OF READINESS

         The Company has instituted a Year 2000 project. The project includes an
evaluation of its computer systems and significant software programs. This
evaluation includes the Company's network hardware and software, Point-of-Sale
hardware and software at the Company-owned Centers and accounting and business
process software. The Company has developed an implementation plan to replace
the systems noted in its evaluation that did not appear to be Year 2000
compliant.

         As part of the Company's Year 2000 project, the Company plans to
contact its significant third party suppliers, such as its oil and parts
suppliers, to determine the extent to which the Company is vulnerable to its
suppliers' failure to remediate their Year 2000 issues. However, the Company
cannot assure that third-party suppliers will adequately address their Year 2000
issues or that failure of the third-party suppliers to address their Year 2000
issues would not have a material adverse effect on the Company or its
operations.

         In addition, the Company has commenced initial communication with its
franchisees to determine the extent to which the Company is vulnerable to the
franchisees' failure to remediate their Year 2000 issues. However, the Company
cannot assure that the franchisees will adequately address their Year 2000
issues or that failure of the franchisees to address their Year 2000 issues
would not have a material adverse effect on the Company or its operations.

THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

         Expenditures through December 31, 1998, have been minimal. Based upon
the findings at December 31, 1998, the Company's estimated costs of becoming
Year 2000 compliant are less than $150,000.

THE RISKS ASSOCIATED WITH THE COMPANY'S YEAR 2000 ISSUES

         The Company's failure to resolve Year 2000 issues on or before December
31, 1999, could result in system failures or miscalculation causing disruption
in operations and normal business activities. Additionally, failure to timely
remediate Year 2000 issues by third parties upon whom the Company's business
relies could result in disruptions in the Company's supply of parts and
materials or result in other problems related to the Company's daily operations.

                                    F-23

<PAGE>

J.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

CONTINGENCY PLAN

         The Company is currently working on a contingency plan for all critical
aspects of the Year 2000 issues.

K.      SUBSEQUENT EVENT

         Effective March 26, 1999, the Company entered into a merger agreement
with QL 3000, Inc., a privately held company. The merger agreement provides that
each shareholder of the Company will receive $1 per outstanding share of common
stock and each preferred shareholder will receive the stated value of their
preferred stock in addition to all applicable unpaid dividends. The completion
of the merger agreement is subject to QL 3000, Inc. obtaining appropriate
financing for the acquisition, in addition to regulatory and shareholder
approval. Should the merger agreement be consumated, the Company would incur
approximately $270,000 of transaction costs.







                                      F-24

<PAGE>

L.       SEGMENT INFORMATION

         The Company operates in two principal business segments: the Company
owns and operates automotive quick-service preventive fluid maintenance Centers,
and additionally, franchises automotive quick-service preventive fluid
maintenance Centers. The accounting policies of the two segments are the same as
those described in the summary of significant accounting policies. Franchise
operations includes all corporate overhead costs. Each segment is managed
separately and is evaluated based on profit or loss from operations before
income taxes.

         Information on the Company's business segments is as follows:

<TABLE>
<CAPTION>

For the years ended December 31:

                                                            1998             1997              1996
                                                       -------------    --------------    --------------
<S>                                                    <C>              <C>               <C>
Operating revenues:
  Franchise and Corporate operations..............         5,216,300         6,426,528         5,726,592
  Company-owned Center operations.................        14,885,285        14,742,786        14,416,201
                                                       -------------    --------------    --------------
         Total Operating Revenues.................        20,101,585        21,169,314        20,142,793
                                                       =============    ==============    ==============
Net interest expense:
  Franchise and Corporate operations..............           (47,116)          (55,912)          (35,349)
  Company-owned Center operations.................          (752,131)         (653,100)         (587,461)
                                                       -------------    --------------    --------------
         Total Net Interest Expense...............          (799,247)         (709,012)         (622,810)
                                                       =============    ==============    ==============
Depreciation and amortization:
  Franchise and Corporate operations..............           175,494           148,071           148,688
  Company-owned Center operations.................           837,450           824,659           791,007
                                                       -------------    --------------    --------------
         Total Depreciation and                                                                          
         Amortization.............................         1,012,944           972,730           939,695
                                                       =============    ==============    ==============
Net income (loss):
  Franchise and Corporate operations..............        (2,118,245)         (914,382)         (531,608)
  Company-owned Center operations.................            88,397          (244,204)          (45,515)
                                                       -------------    --------------    --------------
         Total Net Income (loss)..................        (2,029,848)       (1,158,586)         (577,123)
                                                       =============    ==============    ==============

At December 31:

Identifiable Assets
  Franchise and Corporate operations..............         5,260,678         6,522,163         6,964,094
  Company-owned Center operations.................         8,951,586         8,875,687         8,253,029
                                                       -------------    --------------    --------------
         Total Assets.............................        14,212,264        15,397,850        15,217,123
                                                       =============    ==============    ==============
</TABLE>

                                       F-25

<PAGE>

M.      SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION

         The following table sets forth, by period, the amount and nature of
amounts paid and received for the acquisition, sale (refranchising) and closure
of Company-owned Centers:

<TABLE>
<CAPTION>

                                                                        Years Ended December 31,
                                                               -----------------------------------------
                                                                 1998            1997             1996
                                                               --------        --------        ---------
<S>                                                           <C>             <C>             <C>
Acquisition of Centers:
  Number of Centers purchased ........................                -               3                2
                                                               ========        ========        =========
  Number of Centers foreclosed........................                3               -                5
                                                               ========        ========        =========
  Receivables applied (net of related
    allowance)........................................        $  83,843          18,430          251,328
  Liabilities assumed.................................           83,159         370,835        1,218,962
  Loss on foreclosure.................................          (70,500)              -                -
  Cash paid ..........................................                -         688,191          394,389
                                                               --------        --------        ---------
  Cost of assets acquired.............................        $  96,502       1,077,456        1,864,679
                                                               ========        ========        =========
Sales:
  Number of Centers refranchised/closed...............                3              6*                5
                                                               ========        ========        =========

  Cash received.......................................        $ 115,450         116,901           75,354
  Notes received/accounts receivable granted..........           15,769          26,800          124,777
  Liabilities assumed by purchaser....................                -          40,875           39,750
  Loss on sale........................................           36,767         327,850           58,421
  Operating and marketing subsidies                                                                                                
   granted to purchaser...............................                -               -          (97,750)
  Franchise fees......................................                -          14,000           28,000
  Franchise costs.....................................                -               -           (5,000)
                                                               --------        --------        ---------
Net book value of Centers
refranchised/closed...................................        $ 167,986         526,426          223,552
                                                               ========        ========        =========

</TABLE>

         * Includes one Center which was originally developed to be a
Company-owned Center, but was sold to a franchisee prior to opening.

         During the year ended December 31, 1998, there were the following
non-cash transactions: the Company issued 10,810 shares of stock at an average
value of $1.25 per share in accordance with its matching requirement under the
Company's 401(k) plan; a franchise license in the amount of $10,000, net of
deferred costs of $2,173, was cancelled and applied to a franchisee's obligation
to the Company; a capital lease obligation of $196,900 was recorded for a
Company-owned Center; a franchisee abandoned two sites, resulting in two direct
financing leases being cancelled and two capital lease buildings being recorded
for an aggregate amount of $447,384; subsequently, one site was re-sublet to a
third party resulting in a direct financing lease replacing the previously
recorded building, less accumulated

                                    F-26

<PAGE>

M.      SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION (CONTINUED)

depreciation; and the Company wrote off two direct financing lease receivables
and the corresponding capital lease obligations of $614,412 based on the Company
being released from the leases.

         During the year ended December 31, 1997, there were the following
non-cash transactions: the Company issued 33,234 shares of stock at an average
value of $1.36 per share in accordance with its matching requirement under the
Company's 401(k) plan; the Company wrote off a direct financing lease receivable
and the corresponding capital lease obligation of $153,316 based on the
franchisee renegotiating the lease resulting in the Company being released from
the lease; a capital lease obligation of $386,045 was recorded; and a direct
financing lease receivable and the corresponding capital lease obligation of
$83,619 was written off based on the sale of the related Center to a third
party. As a result of the sale, the landlord reduced the Company's obligation
from a primary lessor to a guarantor.

         During the year ended December 31, 1996, there were the following
non-cash transactions: the Company issued 40,616 shares of stock at an average
value of $1.14 per share in accordance with its matching requirement under the
Company's 401(k) plan; the Company entered into a settlement agreement with a
franchisee, who owned two Centers, whereby $109,439 of receivables, $7,000 of
lease deposits and one undeveloped license of $16,312 were exchanged for a
non-interest bearing note receivable discounted to $86,127 upon the sale of the
Centers to a new franchisee; franchise licenses in the amount of $15,392, net of
deferred costs of $2,222, were canceled and applied to franchisees' obligations
to the Company; a parcel of land and a building were transferred from Real
Estate Held for Sale to Property and Equipment; and a capital lease obligation
of $368,000 was recorded for a Company-owned Center.

N.       RELATED PARTY TRANSACTIONS

         On February 5, 1997, the Company entered into a Consultant Agreement
with Rex L. Utsler. The original term of the Agreement was from March 4, 1997
through March 3, 1999. The agreement required Mr. Utsler to perform such duties
and services as may be assigned to him from time to time at the direction of the
Company. For these services, Mr. Utsler was paid a fee of $16,071 per month, was
reimbursed for his expenses incurred on behalf of the Company and received
medical benefits provided generally to the Company's employees. When Mr. Utsler
returned to the Company as President, Chief Operating Officer and Director, the
Agreement was amended. The monthly consulting fees of $16,071 were suspended.
The remaining, unpaid consulting fees from the period September 19, 1998 through
March 3, 1999, totaling approximately $86,000, will convert to severance
payments in the event of any change in the employment relationship between Mr.
Utsler and Grease Monkey Holding Corporation, including a change in control of
Grease Monkey Holding Corporation. In addition, Mr. Utsler will accrue one month
of additional severance pay effective beginning September 18, 1998, for each
month of employment as President and Chief Operating Officer, to a maximum
severance compensation of 24 months' pay.

         During 1998, the Company borrowed a total of $409,000 from a related
party whose principals are directors and/or shareholders of Grease Monkey
Holding Corporation. The notes are due upon demand and bear interest at one
percent over the Bank National Association Reference Rate. At December 31, 1998,
these rates varied from 8.5 to 8.75 percent. During 1998, the Company expensed
$16,330 in interest, all of which was accrued at December 31, 1998. In addition,
this related party guaranteed a note payable with a bank in the amount of
$75,500.


                                      F-27

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT NO.                DOCUMENT                                                         PAGE
----------                 --------                                                         ----
<S>               <C>                                                                      <C>
         3.       Articles of Incorporation and Bylaws.

                  (a)      Bylaws, as amended through March 4, 1991,
                           incorporated by reference to the Annual Report on
                           Form 10-KSB for the fiscal year ended December 31,
                           1992.                                                             N/A

                  (b)      Restated Articles of Incorporation, filed November 1,
                           1991, incorporated by reference to the Annual Report
                           on Form 10-K for the fiscal year
                           ended December 31, 1991.                                          N/A

                  (c)      Articles of Amendment to Articles of Incorporation
                           filed June 29, 1992 incorporated by reference to the
                           Annual Report on Form 10-KSB for the fiscal
                           year ended December 31, 1992.                                     N/A

                  (d)      Articles of Amendment to the Articles of
                           Incorporation filed August 15, 1996, incorporated by
                           reference to the Quarterly Report on Form 10-BB
                           QSB for the quarter ended June 30, 1996.                          N/A

         4.       Instruments Defining the Rights of Holders Including Indentures.

                  (a)      Statement of Designation, Voting Powers, Preferences,
                           and Rights of the Series C Preferred stock of Grease
                           Monkey Holding Corporation incorporated by reference
                           to the Annual Report on Form 10-KSB for the fiscal
                           year ended December 31, 1993.                                     N/A

         10.      Material Contracts.

                  (a)      1986 Incentive Stock Option Plan, incorporated by
                           reference to the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1993.                          N/A

                  (b)      1993 Incentive Stock Option Plan, incorporated by
                           reference to the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1994.                          N/A

                  (c)      Amendment to 1993 Incentive Stock Option Plan,
                           incorporated by reference to the Annual Report on
                           Form 10-KSB for the fiscal year ended December 31,
                           1996.                                                             N/A

                  (d)      1994 Stock Incentive Plan, incorporated by reference
                           to the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1994.                          N/A

                                           i

<PAGE>

                  (e)      Amendment to 1994 Stock Incentive Plan, incorporated
                           by reference to the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996.                          N/A

                  (f)      Sublease Agreement dated April 9, 1998, between
                           Wells Fargo Bank, N.A. and Grease Monkey
                           International, Inc.                                               ___

                  (g)      Current form of Grease Monkey Franchise Agreement
                           currently in effect, incorporated by reference to
                           the Annual Report on Form 10-KSB for the fiscal
                           year ended December 31, 1997.                                     N/A

                  (h)      Mobil Oil Company Supply Contract dated February 24,
                           1993, for Center #234 (similar contract form used for
                           all centers), incorporated by reference to Annual
                           Report on Form 10-KSB for the fiscal
                           year ended December 31, 1992.                                     N/A

                  (i)      Business Loan Agreement with Bank of America for
                           $2,000,000 three year line of credit, incorporated by
                           reference to the Annual Report on Form 10-KSB
                           for the fiscal year ended December 31, 1996.                      N/A

                  (j)      Consultant Agreement between Grease Monkey Holding
                           Corporation and Rex L. Utsler, incorporated by
                           reference to the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996.                          N/A

                  (k)      Amendment to Consultant Agreement between Grease Monkey
                           Holding Corporation and Rex L. Utsler.                            ___

                  (l)      $5,000,000 Loan Agreement with Citicorp Leasing,
                           Inc., incorporated by reference to the Quarterly
                           Report on Form 10-QSB for the period ended
                           September 30, 1997.                                               N/A

                  (m)      Master Supply Contract dated September 29, 1997, with
                           Mobil Oil Corporation, incorporated by reference to
                           the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1997.                          N/A

                  (n)      Employment Agreement dated March 12, 1998, with
                           Charles E. Steinbrueck, incorporated by reference to
                           the Annual Report on Form 10-KSB for the fiscal
                           year ended December 31, 1997.                                     N/A

                  (o)      Employment Agreement dated January 30, 1998, with
                           Gary L. Wofford, incorporated by reference to the
                           Annual Report on Form 10-KSB for the fiscal year
                           ended December 31, 1997.                                          N/A

                                         ii

<PAGE>

                  (p)      Master Franchise Agreement for the Republic of
                           Mexico, incorporated by reference to the Quarterly
                           Report on Form 10-QSB for the quarter ended
                           September 30, 1998.                                               N/A

                  (q)      Agreement and Plan of Merger among Grease Monkey
                           Holding Corporation and QL 3000, Inc., dated March
                           26, 1999, incorporated by reference to the Current
                           Report on Form 8-K dated March 26, 1999.                          N/A

                  (r)      Form of warrants issued to related parties.                       ___

         21.      Subsidiaries of the Registrant

                  (a)      Grease Monkey International, Inc., incorporated in
                           the State of Colorado (100% owned).

                  (b)      GM Properties, Inc., incorporated in the State of
                           Colorado (100% owned).

                  (c)      Grease Monkey de Mexico SA de CV., incorporated in
                           Mexico (100% owned).

         23.      Consent of Experts and Counsel                                             ___

                  (a)      Consent of KPMG LLP.

         27.      Financial Data Schedule - 1998.                                            ___

</TABLE>

                                       iii