United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998

Commission File Number 0-25164

LUCOR, INC.

Florida 65-0195259
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

790 Pershing Road
Raleigh, North Carolina 27608
(Address of Principal Executive Offices) (Zip Code)

919-828-9511
(Registrant's telephone number, including area code)

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

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

Class A Common Stock, $.02 par value

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of March 15, 1999, was $ 5,697,874

As of March 15, 1999, there were 2,316,133 shares of the Registrant's Class A
Common Stock, $.02 par value, outstanding and 502,155 shares of the
Registrant's Class B Common Stock, $.02 par value, outstanding.

Documents Incorporated by Reference

Portions of the Registrant's Proxy Statement (the "Proxy Statement") for the
Annual meeting of Stockholders to be held in May 1999 are incorporated by
reference in Parts II and III.

Lucor, Inc.
Index to Form 10-K
For the Year Ended December 31, 1998

PART I Page

Item 1 - Business . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 2 - Properties . . . . . . . . . . . . . . . . . . . . . . . . . 6

Item 3 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 6

Item 4 - Submission of Matters to a Vote of Security-Holders . . . . . 6

PART II

Item 5 - Market for the Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . . . 7

Item 6 - Selected Financial Data . . . . . . . . . . . . . . . . . . . 7

Item 7 - Management's Discussion and Analysis
Financial Condition and Results of Operation . . . . . . . 10

Item 8 - Financial Statements and Supplementary Data . . . . . . . . . 17

Item 9 - Changes in and Disagreements with Accountants
or Accounting and Financial Disclosure . . . . . . . . . 49

PART III

Item 10 - Directors and Executive Officers of the Registrant . . . . . . 50

Item 11 - Executive Compensation . . . . . . . . . . . . . . . . . . . . 50

Item 12 - Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . 50

Item 13 - Certain Relationships and Related Transactions . . . . . . . . 50

PART IV

Item 14 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . . . . . . . . . 51

PART I

Item 1 - Business

General

Lucor, Inc. (the "Registrant" or the "Company") is the largest franchisee
of Jiffy Lube International, Inc. ("JLI") in the United States. These franchises
consist of automotive fast oil change, fluid maintenance, lubrication, and
general preventative maintenance service centers under the name "Jiffy Lube." As
of December 31, 1998, the Company operated one hundred twenty eight service
centers in seven states, including twenty seven service centers in the Raleigh-
Durham, North Carolina DMA (Geographic Designated Market Area defined for
television markets), twenty two service centers in the Cincinnati, Ohio DMA
(which includes northern Kentucky), twenty service centers in the Pittsburgh,
Pennsylvania DMA, fifteen service centers in the Dayton, Ohio area, five service
centers in the Toledo, Ohio area, eleven service centers in the Nashville,
Tennessee area, twenty one in the Richmond and Tidewater Virginia DMA's, and
seven service centers in the Lansing, Michigan area. The operations of the
service centers in each of these markets are conducted through subsidiaries of
the Company, each of which has entered into area development (except Lansing)
and franchise agreements with JLI. Unless the context otherwise requires,
references herein to the Company or the Registrant refer to Lucor, Inc. and its
subsidiaries.

During 1998, the Company built two service centers plus acquired three
service centers from independent operators. The acquired service centers have
subsequently been changed to Jiffy Lube service centers. In addition, it
acquired twenty three Jiffy Lube service centers from Tidewater Lube Ventures,
Inc. and Lube Ventures East, Inc., covering the areas of Richmond, Virginia,
Tidewater, Virginia, and eastern North Carolina. The acquisition of these
service centers represented a significant shift in the Company's growth
strategy. The Company purchased an existing region for which the Jiffy Lube
name had a strong recognition and the operation had strong cash flows rather
than a ground up, new development or a turnaround requiring a great deal of
management effort to reach those goals. The Company will be following this
strategy more closely in the future along with building new service centers or
acquiring independent operators within the areas where the Company already has
a strong presence.

The Company took a $1,383,475 write down of assets related to twelve of
its sixteen service centers located in Sears auto service centers in the fourth
quarter in 1998. Cash flows generated by the Sears operations did improve in
1998 but were in fact negative for all but four of the service centers. This
along with expected continuing losses led to the decision to write off the
assets involved in the Sears operations. Since the end of 1998, four service
centers located in Sears auto service centers have been closed.

Quick Lube Industry

In the past, the traditional provider of oil change and lubrication
services has been the corner gas station. The decline in the number of full-
service gasoline stations has reduced the number of convenient places available
to customers for performing basic preventative maintenance and fluid replace-
ment service on their automobiles. The Company believes that this trend
combined with convenience and service are significant factors in the continuing
success of quick lube centers in the marketplace.

In April 1998, Pennzoil announced the merger of Pennzoil and Quaker State
into a new company, Pennzoil-Quaker State Company. Pennzoil is the parent
company for Jiffy Lube International, the franchisor of Jiffy Lube. Quaker
State is the franchisor of Q Lube, which as of March 1, 1999 had 585 service
centers in operation. Some of the service centers are located in regions where
the Company has dominant influence and these service centers will be either
closed or acquired by the Company. As of March 1, 1999, 1,588 Jiffy Lube
service centers were open in the United States. Franchisees of JLI operated
1,009 of the service centers and JLI owned and operated the remaining 579
locations. (Source:National Oil & Lube News, March 1999) Of the total JLI
franchised service centers, the Company currently operates one hundred twenty
four locations, making it the largest franchisee.

According to National Oil & Lube News, March 1999 edition, there are
approximately 6,037 fast lube chain service centers in operation as of March 1,
1999, representing an increase in the number of fast lube operations by 4% over
1998. Jiffy Lube is the largest fast lube operation chain, more than double
the number of service centers run by the next largest chain.

Services

The products and services offered by the Company are designed to provide
customers with a convenient way to perform preventative maintenance on their
vehicles, typically in minutes and without an appointment. The Company's
proprietary service mark "Signature Service" includes changing engine oil and
filter, lubricating the chassis, checking for proper tire inflation, washing
the windows, vacuuming the interior of the car, checking and replenishing
fluids in the transmission, differential, windshield washer, battery and power
steering, and examining the air filter, lights, and windshield wiper blades
while performing a manufacturers recommended service review. A quality
inspection is then completed and a Signature Service card is signed by a
lubrication technician confirming that the service was properly performed. The
pricing of a Signature Service ranges from $25.99 to $28.99, depending on the
geographic area.

The Company also offers several other products and services including fuel
injection system cleaning, automotive additives, manual transmission,
differential and transfer case fluid replacement, radiator coolant replacement,
tire rotation, air filter replacement, breather element replacement, positive
crankcase ventilator valve (PCV valves) replacement, wiper blade replacement,
headlight and light bulb replacement, complete transmission fluid replacement,
preventative maintenance packages, and auto safety and emissions inspection
services. In 1998, the Company introduced, as a test, the sale of batteries in
most of its markets. The Company does not perform any repairs on vehicles, only
preventative maintenance and fluid replacement services.

In combination with JLI, the Company's "fleet" business is arranged with
large, national and local consumers of lubrication services who may obtain such
services at the Company's service centers. These services are billed by the
Company to the fleet customers through JLI for national fleet customers and by
the Company for local fleet customers. The Company solicits most fleet business
from local fleet customers in each of its markets.

Service Centers

A typical service center consists of approximately 2200 square feet with
three service bays, a customer lounge, storage area, a full basement and rest
rooms. The operating staff at each service center consists of a manager, an
assistant manager and usually eight additional employees. The service centers
are open six days a week (with the exception of service centers located at
Sears auto center which are open seven days a week, four hours on Sunday).

In general, the Company's service centers are well lit, clean, and provide
customers an attractive surrounding and comfortable professional waiting area
while their vehicle is serviced.

Marketing

The Company uses newsprint, public relations, direct marketing, radio and
television advertising to market its products and services. In addition to the
Company's marketing programs, JLI conducts national marketing programs for
Jiffy Lube service centers, principally through television advertising.
Pennzoil conducts a national advertising program for Pennzoil motor oil and
other Pennzoil lubrication products. The Company does not pay any fee to either
JLI or Pennzoil for their advertising programs. In addition to direct adver-
tising, the Company emphasizes the development of goodwill in the communities
in which it operates through involvement in community promotions. Some of the
Company's community campaigns include Coats for Kids, Teaching Excellence, Jump
Start on Reading, and Boy Scouts Scouting for Food.

Area Development Agreements and Franchise Agreements

The Company operates Jiffy Lube service centers under individual franchise
agreements that are part of broader exclusive development agreements with JLI,
the franchisor. The exclusive development agreements require the Company to
identify sites for and develop a specific number of service centers in specific
territories and the separate franchise agreements each provide the Company the
right to operate a specific service center for a period of 20 years, with two,
10-year renewal options.

Each development agreement grants the Company exclusive rights to develop
and operate a specific number of service centers within a defined geographic
area, provided that a certain number of service centers are opened over
scheduled intervals.

Cincinnati, Dayton, Nashville, and Toledo. The Company amended its Area
Development Agreement with JLI in August 1995 to include all of these areas.
The Company has satisfied its obligations to develop service centers under its
Area Development Agreement for these areas. The Company has a right of first
refusal to develop service centers until July 31, 2019.

Raleigh-Durham. The Company has satisfied its obligations to develop
service centers under its Area Development Agreement for the Raleigh-Durham
market area, and currently has a right of first refusal to develop any
additional service centers which JLI may propose to develop or offer to others
in this market. This right extends to December 31, 2006 in the Company's
Raleigh-Durham market.

Pittsburgh. The Company has satisfied its obligations to develop service
centers under its Area Development Agreement for the Pittsburgh market area,
and currently has a right of first refusal to develop any additional service
centers which JLI may propose to develop or offer to others in this market.
This right extends to June 30, 2019.

Lansing. The Company has not entered into an Area Development Agreement
regarding Lansing nor is the Company contemplating entering into an agreement
at this time.

Richmond/Tidewater. On April 1, 1998, the Company purchased substantially
all of the assets of Tidewater Lube Ventures, Inc. and Lube Venture East, Inc.
which included twenty one Jiffy Lube service centers in the Richmond and
Tidewater Virginia areas and two Jiffy Lube service centers in Eastern North
Carolina. The Company was also assigned an area development agreement as part
of the purchase which requires the Company to develop one service center in
each of the next three years. The Company has a right of first refusal to
develop service centers until December 31, 2008.

The franchise agreements convey the right to use the franchisor's trade
names, trademarks, and service marks with respect to specific service centers.
The franchisor also provides general construction specifications for the
design, color schemes and signage for a service center, training, operating
manuals and marketing assistance. Each franchise agreement requires the fran-
chisee to purchase products and supplies approved by the franchisor. The
initial franchise fee payable by the Company upon entering into a franchise
agreement for a service center varies based on the market area where the
Company develops the center and the time of development of the center. For
service centers which the Company may develop in 1999, the initial franchise
fee ranges from $12,500 to $35,000. The franchise agreements generally require
a monthly royalty fee of 5% of sales. The royalty fee is reduced to 4% of sales
when the fee for a given month is paid in full by the 15th of the following
month, a practice followed by the Company.

Management Services Agreement

Each of the Company's operating subsidiaries has entered into a management
agreement with Navigator Management, Inc., a Florida corporation (Navigator),
pursuant to which Navigator, as an independent contractor, operates, manages
and maintains the service centers. Navigator is owned by Stephen P. Conway and
Jerry B. Conway, both of whom are executive officers and directors of the
Company and each subsidiary, as well as principal shareholders of the Company.
These agreements continue until the termination of the last franchise agreement
between the Company and JLI. For its services, Navigator receives an amount
equal to a percentage of the annual net sales of each service center operated
by a subsidiary, calculated as follows:

Number of Management Fee
Service Centers Per Service Center

1 - 34 4.50% of the sales of these centers
35 - 70 3.00% of the sales of these centers
71 - 100 2.25% of the sales of these centers
More than 100 1.50% of the sales of these centers

Expansion Plans

The Company added twenty eight service centers in 1998, bringing the total
number of service centers that the Company operates to one hundred twenty eight
at the end of the year. The Company continues to review acquisitions that will
fit into its strategic expansion plans, focusing on service centers in areas
where the Jiffy Lube name is well recognized and the area has positive cash
flow. The Company will continue its efforts in expanding its presence in areas
where it already has a significant presence. At the end of 1998, there were
several service center sites being reviewed for possible expansion, some of
which are under construction at this time.

In March 1999, the Company signed a letter of intent with Jiffy Lube
International and Q Lube, Inc. to purchase seventy one service centers.
Eighteen of the service centers are currently Q Lube service centers and are
located in areas currently operated by the Company. The remaining fifty three
are a combination of Jiffy Lube and Q Lube Service centers located in the
Atlanta, Georgia DMA. It is anticipated that the Company will acquire these
service centers by the end of April 1999.

Competition

The quick oil change and lubrication industry is highly competitive with
respect to the service location, product type, customer service, and price. The
Company's service centers compete in their local markets with the "installed
market" consisting of service stations, automobile dealers, independent
operators and franchisees of automotive lubrication service centers, some of
which operate multiple units offering nationally advertised lubrication pro-
ducts such as Quaker State and Valvoline motor oil. Some of the Company's
competitors are larger and have been in existence for a longer period than the
Company. However, the Company is larger than many independent operators in its
markets and it believes that its size is an advantage in these markets as it
affords the Company the benefits of marketing, name awareness and service as
well as economies of scale for purchasing and easier access to capital for
improvements.

Government Regulation and Environmental Matters

The Company's service centers store new oil and generate and handle large
quantities of used automotive oils and fluids. Accordingly, the Company is
subject to a number of federal, state and local environmental laws governing
the storage and disposal of automotive oils and fluids. Noncompliance with such
laws and regulations, especially those relating to the installation and main-
tenance of underground storage tanks (UST's), could result in substantial cost.
As of December 31, 1998, seven of the Company's service centers had UST's on
the premises. All seven locations have UST's at the requirement of local and
state regulatory authorities. Those UST's in use comply with all Environmental
Protection Agency regulations that became effective December 22, 1998. The
Company is not aware that any leaks have occurred at any of its existing UST's.

In addition, the Company's service centers are subject to local zoning
laws and building codes which could adversely impact the Company's ability to
construct new service centers or to construct service centers on a cost-
effective basis.

Employees

As of December 31, 1998, the Company employed 1,328 people, of which 1,272
were engaged in operating the Company's Jiffy Lube Service Centers and the
remainder were in management, development, marketing, finance and administra-
tive capacities. None of the Company's employees are represented by unions. The
Company considers its employee relations to be good.

Item 2 - Properties

Twenty three of the Company's one hundred twenty eight service centers are
owned, with the balance of the service centers leased. Most of the leases are
for a twenty year period with generally one to two, ten year options to renew.
Twelve of the company's owned service centers are secured by a mortgage held by
Enterprise Mortgage Acceptance Company, LLC ("EMAC"). Forty one of the leased
service centers are secured by a leasehold mortgage held by EMAC. The Company
also owns an 13,500 square foot office building in Raleigh, North Carolina
which is secured by a mortgage to Centura Bank as described in the notes to the
financial statements.

Item 3 - Legal Proceedings

The Company is involved in lawsuits and claims arising in the normal
course of business. Although the outcome of these lawsuits and claims are
uncertain, Management believes that these lawsuits and claims are adequately
covered by insurance or they will not (singly or in the aggregate) have a
material adverse affect on the Company's business, financial condition, or
operations. Those lawsuits and claims against the Company which have not been
resolved and which can be estimated and are probable to occur, have been
accounted for in the Company's financial statements.

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

None.

PART II

Item 5 - Market for the Registrant's Common Equity and Related Stockholder
Matters

The Company has two classes of Common Stock consisting of Class A Common
Stock and Class B Common Stock. The Class A stock is traded on The NASDAQ
Stock Marketr SmallCaps market under the symbol LUCR. The Class B Common Stock
is closely held and not traded in any public market.

As of December 31, 1998, there were 655 holders of record of the Class A
Common Stock and two record holders of the Class B Common Stock. No cash
dividends have ever been paid on either class of the Company's Common Stock.

The following table shows high and low sales prices for the Class A Common
Stock of Lucor as reported on the NASDAQ - SmallCaps market.

1998 1997
Market Price Market Price
Quarter Ended High Low High Low
- ----------------- ------- -------- -------- ---------

March 31 $ 5.00 $ 2.50 $ 7.00 $ 6.00
June 30 $ 6.88 $ 3.88 $ 5.50 $ 4.00
September 30 $ 6.75 $ 4.75 $ 5.25 $ 4.25
December 31 $ 6.00 $ 4.00 $ 4.25 $ 2.75

Item 6 - Selected Financial Data

The selected consolidated financial data of the Company set forth on the
following page are qualified by reference to, and should be read in conjunction
with, the Company's Consolidated Financial Statements and Notes thereto
included elsewhere in this 10-K Report. The income statement data for each of
the years in the five year period ended December 31 and the Balance Sheet data
as of December 31, 1994, 1995, 1996, 1997, and 1998 are derived from audited
Consolidated Financial Statements.

LUCOR, INC.
Five Year Summary of Selected Financial Data

1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------

Income Statement Data:
Net sales $55,307,206 $42,678,313 $37,772,799 $28,153,521 $20,566,519
Cost of sales 12,715,861 9,979,363 8,951,465 6,748,266 4,947,670
----------- ----------- ----------- ----------- -----------
Gross profit 42,591,345 32,698,950 28,821,334 21,405,255 15,618,849
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Direct 20,449,478 16,494,374 14,059,886 10,020,278 6,749,017
Operating 10,981,273 8,923,880 7,786,260 6,053,513 4,640,848
Depreciation, amortization 2,217,366 2,056,059 2,001,300 848,301 442,116
Selling, general, admin. 7,388,269 5,928,152 5,455,291 3,183,110 1,951,464
Impairment Loss
(Sears closing) 1,383,475 - - - -
----------- ----------- ----------- ----------- -----------
42,419,861 33,402,465 29,302,737 20,105,202 13,988,997

Income (loss) from operations 171,484 (703,515) (481,403) 1,300,053 1,629,852

Interest expense (2,664,938) (1,480,679) (1,176,149) (450,471) (205,552)
Income(loss) before provision
for income taxes and extra-
ordinary ite (2,287,498) (2,122,038) (1,464,994) 921,679 1,804,405
Income (loss) before extra-
ordinary item (2,114,481) (1,581,443) (1,201,988) 540,243 1,087,995
Extraordinary loss(net or tax) - (258,625) - - -

Net income (loss) $(2,114,481)$(1,840,068)$(1,201,988)$ 540,243 $ 1,087,995
============ ========== =========== =========== ===========

Preferred dividend (140,000) (140,000) (133,287) (35,000) -
Income (loss) before extra-
ordinary item available
to common shareholders $(1,254,481)$(1,721,443)$(1,335,275)$ 505,243 $ 1,087,995
============ ========== =========== =========== ===========

Basic income (loss) before
extraordinary item per
common share $(0.80) $(0.61) $(0.54) $0.26 $0.62

Diluted income (loss) before
extraordinary item per
common share $(0.80) $(0.61) $(0.54) $0.26 $0.62

Cash dividends declared
per share -0- -0- -0- -0- -0-

Weighted average common shares
outstanding - Basic 2,824,868 2,842,367 2,451,683 1,944,618 1,757,985

Weighted average common shares
outstanding - Dilutive 2,824,868 2,842,367 2,451,683 1,960,382 1,757,985

December 31,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------

Balance Sheet Data:
Cash and other short-term
assets $ 6,947,635 $ 6,614,374 $ 5,213,281 $ 4,143,399 $ 2,967,892
Property and equipment, net 23,292,926 21,839,319 22,506,488 14,246,603 3,140,443
Other assets, net 16,038,927 4,766,587 4,907,840 3,288,044 1,140,210
----------- ----------- ----------- ----------- -----------
Total assets $46,279,488 $33,220,280 $32,627,609 $21,678,046 $ 7,248,545
=========== =========== =========== =========== ===========

Short-term obligations/debt 6,984,231 4,757,756 5,335,200 3,266,336 2,273,300
Long-term liabilities 32,167,303 18,855,114 16,304,431 12,198,958 1,256,886
Preferred stock, redeemable 2,000,000 2,000,000 2,000,000 2,000,000 -
Stockholders' equity 5,127,954 7,607,410 8,987,978 4,212,752 3,718,359

Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operation

Introduction

The Company is engaged through its subsidiaries in the automotive fast oil
change, fluid maintenance lubrication, and general preventative maintenance
service business at one hundred twenty eight service centers located in seven
states. Twenty seven service centers are located in the Raleigh-Durham area of
North Carolina, twenty two in the Cincinnati Ohio area (which includes northern
Kentucky), twenty in the Pittsburgh, Pennsylvania area, fifteen in the Dayton,
Ohio area, five in the Toledo, Ohio area, eleven in the Nashville, Tennessee
area, seven in the Lansing, Michigan area, and twenty one in the Richmond-
Tidewater, Virginia area. Starting in early 1995, the Company embarked on a
plan of expansion, involving acquisition of facilities in new markets as well
as construction of new sites in current markets.

In July 1995 Citicorp Leasing, Inc. agreed to lend $18.0 million to the
Company to refinance existing debt, fund the acquisition of new service center
sites, and to provide capital for the acquisition of additional service centers
in the Raleigh-Durham, Cincinnati, and Pittsburgh areas (See Lucor, Inc. 10-K
for the year ended December 31, 1995). During 1995, the Company acquired
fifteen centers by purchase and developed nine other centers, ending the year
with sixty operating locations. During 1996, the Company acquired substan-
tially all the assets of Quick Lube, Inc., which included six Jiffy Lube
service centers in the Lansing, Michigan area. In addition, site development
continued in its existing markets, adding four centers in Cincinnati, six in
Dayton, three in Nashville, six in North Carolina, and nine in Pittsburgh.
During 1997, the Company added six service centers. One center was acquired in
Lansing, Michigan, a Sears center in Cincinnati, Ohio, one service center in
Dayton, Ohio, one service center in Nashville, Tennessee, and one service
center in Pittsburgh, Pennsylvania. At the end of 1997, the Company had one
hundred service centers in operation.

In 1998, the Company built one service center in Pittsburgh and one in
Nashville. In addition, it acquired three service centers from independent
owners, one in Cincinnati and two in Nashville, that were not Jiffy Lube ser-
vice centers. These service centers have been converted to Jiffy Lube service
centers. On April 1, 1998, the Company acquired substantially all of the
assets of Tidewater Lube Ventures, Inc. ("TLV") and Lube Ventures East, Inc.
("LVE") which added twenty three Jiffy Lube service centers; nine in the
Richmond, Virginia area, twelve in the Tidewater, Virginia area, and two in
eastern North Carolina. At the end of 1998, the Company had one hundred twenty
eight Jiffy Lube service centers in operation.

On December 31, 1997, the Company refinanced its existing debt with
Citicorp Leasing, Inc. through EMAC, resulting in a new debt of $17,949,000.
The Company refinanced its debt to position itself for further expansion. In
February and March, 1998, the Company borrowed an additional $15,061,000 to
finance the purchase of the twenty three stores from TLV and LVE as noted
above.

The revenue and profits generated by the service centers located in Sears
Auto Centers continued to be disappointing in 1998. A review of the cash flow
generated by the service centers shows that all but four of the service centers
had negative cash flows. The Company anticipates closing many of these service
centers located in Sears auto centers and as a result, based on FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", has taken a charge of $1,383,475 in the fourth
quarter. The Company closed four of these service centers on January 31, 1999.

Results of Operations

The Company's primary indicator of business activity is revenue generated.
Costs are measured as a percentage of net sales. Cost of sales and direct costs
(which includes labor at the retail level and other volume-related operating
costs) can be expected to vary approximately in line with sales volumes.
Operating costs include store occupancy costs, insurance, royalties paid to the
franchisor, management fees and other lesser categories of expenses. Store
occupancy costs can be expected to vary, either with periodic, contractual rent
increases at leased locations or as a function of sales for those leases which
have a sales based rent schedule. Real estate taxes are subject to periodic
adjustments. Royalty fees paid to the franchisor are 4% of sales and manage-
ment fees are paid at rates described above (see Management Services
Agreement). The Company's service centers are open six days per week and aver-
age 306 days of operation per year.

1998 Compared to 1997

Net sales increased by 30% from 1997 to 1998 due to the increase in base
business over the previous year as well as the impact of new service centers
which were opened and acquired during 1998 as indicated on the following table:

1998 1997
------------ ------------

Same stores 3% $ 43,974,140 $ 42,678,313

New Stores 11,333,066 0
------------ ------------
Total new sales change 30% $ 55,307,206 $ 42,678,313
============ ============

The Company's average daily sales per service center increased by 15% when
comparing 1998 with 1997. There were two changes in 1998 that had major
impacts on the daily sales per service center. One, the acquisition of TLV and
LVE increased the sales per service center per day by 8.5%. Two, the Company
changed its policy on store openings to close all of its stores on Sunday
except for the service centers located in Sears auto centers. Sales on Sundays
are much less than sales on other days of the week thus boosting the sales per
day. The impact of closing on Sunday cannot be quantified since it is believed
that many customers are going to the Company's service centers on other days of
the week.

Cost of sales, which represents the direct cost of material sold to the
customer (oil, filters, lubricants, wiper blades, additives, etc.) decreased as
a percent of sales from 23.4% to 23.0%. This improvement has been generated
from higher rebates obtained from our major suppliers. A small decrease in the
cost of sales can be traced to a price increase implemented November 1, 1998 in
most of our markets increasing the signature service by $1.00 and smaller
increases in other ancillary items.

Direct operating costs increased by $3,955,104 or 24% in 1998 as compared
to 1997. This increase is less than our sales increase reflecting lower cost
per revenue dollar generated. These costs consist primarily of direct labor and
associated labor benefits costs and supplies expended at each location to run
the service center. As a percent of sales these costs decreased from 38.6% in
1997 to 37.0% in 1998. The majority of the decreased percentage cost of sales
relates to decreased labor costs as a percent of sales. Efforts were made by
the Company in 1998 to control labor costs which has resulted in the lower
labor costs. Higher revenue per service center per day has also decreased
these costs as a percent of sales due to the fixed labor requirement to operate
a service center. In addition, with the closure on Sunday, less hourly labor is
required.

Operating costs increased by $2,057,393 or 23.1% in 1998 as compared to
1997. This increase is less than the sales increase. As a percent of sales,
operating costs decreased from 20.9% of sales in 1997 to 19.9% of sales in
1998. Operating costs consist primarily of facility related costs such as
rents, real estate and personal property taxes plus royalties paid to JLI as
part of the franchise agreement and management fees paid to Navigator Manage-
ment, Inc. Since some of these costs are fixed (mainly rent), the cost per
sales dollar decreases as the sales per day increases. In addition, the Com-
pany has contracted with companies to receive payment for waste oil removed
from its facilities.

Depreciation and amortization costs increased by $161,307. This small
increase in depreciation and amortization reflects the declining depreciation
on assets acquired prior to 1997, since they are being depreciated on an
accelerated basis, offset by the increased depreciation and amortization on
assets acquired in 1998, primarily those of TLV and LVE.

Selling, general, and administrative (SGA) costs increased by $1,460,117
or in 1998 as compared to 1997. As a percent of sales, SGA costs decreased
by 0.5%. The increase in these costs reflect additional costs required due to
the acquisition of additional service centers and the required costs associated
with their administration and marketing.

The Company recorded an impairment loss of $1,383,475 reflecting the write
down of assets at 12 of its 16 service centers located at Sears auto centers.
These service centers had negative cash flow in 1998. The Company closed four
of these service centers on January 31, 1999.

Interest expense increased by $1,184,259 reflecting the increased debt
acquired due to the acquisition as noted above.

Other income increased by $143,800 in 1998 compared to 1997. Other income
increased due to an agreement with a major vending machine operator to supply
drink machines in its stores for a commission. In addition, interest income
increased slightly due to more funds being available for investing.

Income tax benefit represented 7.6% of net income. The benefit is lower
than the statutory rate due to the establishment of a valuation allowance
necessary to offset certain deferred tax assets which management believes may
not be recoverable in the future. The Company has substantial net loss
carry-forwards which can be used to offset future taxable income. No deferred
tax asset was recorded.

Dividends on Series A redeemable preferred stock were $140,000 in 1998.

1997 Compared to 1996

Net sales increased by 13% from 1996 to 1997 due to the increase in base
business over the previous year as well as the impact of new service centers
which were opened during 1997 as indicated on the following table:

1997 1996
------------ -------------

Same stores 10% $ 41,444,735 $ 37,772,799

New Stores 1,233,578 0
------------ ------------
Total new sales change 13% $ 42,678,313 $ 37,772,799
============ ============

The Company's average daily sales per service center declined when
comparing 1997 with 1996. A large impact on the decrease of the average daily
sales per store were the Sears units, which were opened only an average of
three months in 1996. Taking out the Sears operations, average daily sales
per service center increased in 1997 compared to 1996.

Direct operating costs increased by $2,434,488 or 17% in 1997 as compared
to 1996. These costs consist primarily of direct labor and associated labor
benefits costs and supplies expended at each location to run the operation. As
a percent of sales these costs increased from 37.2% in 1996 to 38.6% in 1997.
The majority of the increased percentage cost of sales relates to increased
labor costs as a percent of sales. Due to the fixed labor requirement to
operate a service center, these costs will increase, as a percent of sales, as
the number of cars per day decreases. The Company operates in areas that are
experiencing low unemployment rates which continues to make it difficult to
obtain the necessary labor to run its service centers. The Company has been
able to resist any significant upward pressures on wage rates. We are
uncertain what affect this may have, if any, on future labor rates, but do not
expect any significant upward pressure in 1998.

Operating costs increased by $1,137,620 or 14.6% in 1997 as compared to
1996. The increase in operating costs above the increase in sales, results
from fixed occupancy costs that are higher, as a percent of sales, for new
service centers. Operating costs consist primarily of facility related costs
such as rents, real estate and personal property taxes plus royalties paid to
JLI as part of the franchise agreement and management fees paid to CFA and by
assignment on December 1, 1997 to Navigator Management, Inc.

Depreciation and amortization costs increased by $54,759.

Selling, general, and administrative (SGA) costs increased by $472,861 or
9% in 1997 as compared to 1996. As a percent of sales, SGA costs decreased by
.6%. All of the increase in SGA related to increased marketing efforts for
1997. The Company increased its marketing efforts in order to attract
additional business into its service centers. Other general and administrative
expenses decreased slightly from the previous year.

Interest expense increased by $304,530 reflecting a full year's interest
expense on loans outstanding which were increased over 1996.

Other income decreased by $130,402 in 1997 compared to 1996. Other income
in 1996 included a gain of $47,000 on the sale of the former Corporate
headquarters. Interest income was also lower in 1997 than in 1996 reflecting a
lower average cash balance on hand.

The extraordinary loss of $258,625 (net of tax) was recorded in 1997 to
reflect the write off of unamortized expenses capitalized as part of the cost
of obtaining the Citicorp debt in 1995. On December 31, 1997 this debt was
refinanced using new debt obtained from EMAC (see discussion elsewhere in this
Form 10-K).

Income tax benefit represented 25.5% of net income. The benefit is lower
than the statutory rate due to minimum state income taxes that are due, plus
non deductible reduction of management fees.

Dividends on Series A redeemable preferred stock were $140,000 in 1997.

Liquidity and Capital Resources

As of December 31, 1998, the Company had cash and short term assets of
$6,947,635 and short term obligations (including the current portion of long
term debt) of $6,984,231 for net working capital of ($36,596). Cash provided
by operations amounted to $2,635,958. Net cash used in investing activities
was $16,775,636. These funds were mainly spent on the addition of service
centers and the acquisition of TLV and LVE as noted elsewhere in this 10-K.

In February of 1998, the Company borrowed additional funds through an
agreement with Enterprise Mortgage Acceptance Company, LLC ("EMAC") totaling
$1,787,000. This loan carries an interest rate of approximately 8.54% and is
amortized over a 15 year period. The first three month's payments are interest
only. In March of 1998, the Company borrowed an additional $13,274,000 through
an agreement with EMAC. This loan carries an interest rate of approximately
8.56% and is amortized over a 15 year period. Most of these funds were applied
towards the purchase price of the twenty three Jiffy Lube service centers
referenced above.

As of December 31, 1997, the Company had cash and short term assets of
$6,614,374 and short term obligations (including the current portion of long
term debt) of $4,757,756 for net working capital of $ 1,856,618. Cash provided
by operations amounted to $777,239. Net cash used in investing activities was
$957,872. These funds were mainly spent on the addition of service centers.

On December 31, 1997, the Company refinanced its loan with Citicorp
Leasing, Inc. by obtaining a series of loans totaling $17,949,000 from EMAC.
These new loans carry a fixed interest rate of 8.74% and are payable as
interest only for the first three months. Loans with underlying collateral of
fee simple properties are amortized in equal installments over twenty five
years, all other loans are amortized over fifteen years. The total amount amor-
tized over twenty five years is $10,871,000, the remaining $7,078,000 is amor-
tized over fifteen years. The Company refinanced its loans with Citicorp due
to a willingness of EMAC to finance future expansion plans, and has obtained
such additional financing from EMAC since December 31, 1997. Additional funds
were obtained from a minority shareholder and Pennzoil Products Company total-
ing $650,000.

CFA Management, Inc. ("CFA") elected to reduce its management fees to the
Company by $338,000 for 1997. CFA made this reduction as a demonstration of
CFA's confidence in the future of the Company during its historic expansion
period. The Company originally treated these decreases in fees as a reduction
in operating expense. However, following discussions with the Securities and
Exchange Commission (SEC), the Company decided to account for the reduction of
management fees as a capital contribution.

Based on the Company's current level of operations and anticipated growth
in net sales and earnings as a result of its business strategy, the Company
expects that cash flows from operations and funds from currently available
facilities will be sufficient to enable the Company to meet its anticipated
cash requirements for the next 12 months, including for debt service. In
addition, the Company believes that it will be able to obtain additional fin-
ancing through its lender to facilitate expansion plans over the next three to
five years. The Company is currently negotiating with its lender to obtain
additional financing to acquire additional service centers as previously noted.
If the Company is unable to satisfy its cash requirements, the Company could be
required to adopt one or more alternatives, such as reducing or delaying cap-
ital expenditures and expansion plans, restructuring indebtedness, or selling
assets. The Company contemplates the sale of additional equity instruments
over the next twelve months. There can be no assurance that there will be a
market for the Company's equity instruments at a price that the Company deems
sufficient. The sale of additional equity could result in additional dilution
to the Company's stockholders.

Forward Looking Statements

Certain statements in this Form 10-K "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among others, the following:
competition, success of operating initiative, advertising and promotional
efforts, adverse publicity, acceptance of new product offerings, availability,
locations and terms of sites for store development, changes in business
strategy or development plan, availability and terms of capital, labor and
employee benefit costs, changes in government regulation, regional weather con-
ditions, and other factors specifically referred to in this 10-K.

Year 2000

The Company has reviewed the potential impact, if any, on its operations
as a result of the year 2000. Substantially all of its systems are believed
to be year 2000 compliant with the exception of its point of sale systems (POS)
used in its service centers. The Company has a plan in place to replace the
POS systems by September 30, 1999. It has already begun implementing this plan
and it believes that it will be completed on schedule. A contingency plan is
available, in case of any major problems with the implementation. The Company
can upgrade its current system to be year 2000 compliant by software available
from the supplier of its current POS. The financial impact on the Company is
not substantial and many of the costs would have been incurred due to the
replacement of aging POS systems in its service centers. The Company has also
reviewed the compliance of its major suppliers who have reported that they do
not anticipate any problems being ready for the year 2000.

Item 8 - Consolidated Financial Statements and Supplementary Data

Page

Consolidated Financial Statements:

Independent Auditors' Report 18

Consolidated Balance Sheets as of December 31, 1998 and 1997 19

Consolidated Statements of Loss for the years ended
December 31, 1998, 1997 and 1996 20

Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996 21

Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 22

Notes to Consolidated Financial Statements 24

Financial Statement Schedule:

All schedules have been omitted because they are not applicable or are not
required or the information required to be set forth therein is included in the
Consolidated Financial Statements or Notes thereto.

LUCOR, INC. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1998 and 1997

(With Independent Auditors' Report Thereon)

Independent Auditors' Report

To the Board of Directors and Stockholders
Lucor, Inc. and Subsidiaries
Raleigh, North Carolina

We have audited the accompanying consolidated balance sheets of Lucor, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of loss, 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 Lucor, Inc. 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.

/s/ KPMG LLP

KPMG LLP

Raleigh, North Carolina
March 20, 1999

LUCOR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997

Assets 1998 1997
------ ------------- ------------

Current assets:
Cash and cash equivalents (note 14) $ 3,269,859 1,548,418
Accounts receivable, trade, net of allowance for doubtful
accounts of $60,935 and $41,500 at December 31, 1998 and
1997, respectively 356,134 293,364
Accounts receivable, other 448,606 1,974,445
Income tax receivable 40,241 466,523
Inventories, net of obsolescence reserves of $47,932 and $-0-
at December 31, 1998 and 1997, respectively 2,401,953 2,138,180
Prepaid expenses 430,842 193,444
------------- ------------
Total current assets 6,947,635 6,614,374
------------- ------------
Property and equipment, net of accumulated
depreciation (notes 3 and 6) 23,292,926 21,839,319
------------- ------------
Other assets:
Franchise and operating rights, net of accumulated amortization
of $215,025 at December 31, 1998 (note 7) 8,672,665 -
Goodwill, net of accumulated amortization of $420,856 and $292,431
at December 31, 1998 and 1997, respectively 4,118,558 2,643,435
Leasehold, license, application, area development, loan acquisition,
and non-compete agreements, net of accumulated amortization
of $997,298 and $811,982 at December 31, 1998 and 1997,
respectively 3,156,011 2,036,096
Deposits and pre-opening costs, net of accumulated
amortization of $3,951 and $2,315 at December 31, 1998
and 1997, respectively 91,693 87,056
------------- ------------
16,038,927 4,766,587
------------- ------------
$ 46,279,488 33,220,280
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt (note 6) 1,675,548 305,578
Current portion of capital lease (note 8) 23,631 25,478
Accounts payable 2,501,057 2,499,432
Accrued expenses:
Payroll 690,279 701,279
Management fees 444,450 307,215
Property taxes 389,752 319,298
Other 1,224,514 564,476
Preferred dividend 35,000 35,000
------------- ------------
Total current liabilities 6,984,231 4,757,756
------------- ------------

Long-term debt, net of current portion (note 6) 32,112,596 18,642,480
Deferred gain (note 8) 54,707 -
Capital lease, net of current portion (note 8) - 23,634
Deferred taxes (note 4) - 189,000
------------- ------------
Total long-term liabilities 32,167,303 18,855,114

Series A redeemable preferred stock (note 10) 2,000,000 2,000,000
Stockholders' equity (notes 9, 10, 11 and 12):
Preferred stock, $.02 par value, ($.10
liquidation preference), authorized 5,000,000
shares, issued and outstanding, none - -
Common stock, Class "A", $.02 par value,
5,000,000 shares authorized, 2,316,133 and 2,145,733
shares issued and outstanding at December 31, 1998
and 1997, respectively 46,322 42,914
Common stock, Class "B", $.02 par value,
2,500,000 shares authorized, 502,155 and 702,155 shares issued
and outstanding at December 31, 1998 and 1997 10,043 14,043
Additional paid-in capital 9,375,259 9,599,642
Treasury stock at cost (760 shares at December 31, 1998 a (3,437) (3,437)
Accumulated deficit (4,300,233) (2,045,752)
------------- ------------
Total stockholders' equity 5,127,954 7,607,410
------------- ------------
Commitments and contingencies (notes 7 and 8)
$ 46,279,488 33,220,280
============= ============
See accompanying notes to consolidated financial statements.

LUCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Loss
Years ended December 31, 1998, 1997 and 1996

1998 1997 1996
---- ---- ----

Net sales $ 55,307,206 42,678,313 37,772,799
Cost of sales (note 5) 12,715,861 9,979,363 8,951,465
------------- ------------ ------------
Gross profit 42,591,345 32,698,950 28,821,334
------------- ------------ ------------
Costs and expenses:
Direct 20,449,478 16,494,374 14,059,886
Operating (note 5) 10,981,273 8,923,880 7,786,260
Depreciation and amortization 2,217,366 2,056,059 2,001,300
Selling, general and administrative 7,388,269 5,928,152 5,455,291
Impairment loss - Sears assets (note 13) 1,383,475 - -
------------- ------------ ------------
42,419,861 33,402,465 29,302,737
------------- ------------ ------------
Income (loss) from operations 171,484 (703,515) (481,403)
------------- ------------ ------------
Interest expense (2,664,938) (1,480,679) (1,176,149)
Other income 205,956 62,156 192,558
------------- ------------ ------------
(2,458,982) (1,418,523) (983,591)
------------- ------------ ------------
Loss before provision for income taxes
and extraordinary item (2,287,498) (2,122,038) (1,464,994)

Income tax benefit (note 4) 173,017 540,595 263,006
------------- ------------ ------------
Loss before extraordinary item (2,114,481) (1,581,443) (1,201,988)

Extraordinary item - loss on extinguishment
of debt, net of income tax benefit of
$133,000 (note 6) - (258,625) -
------------- ------------ ------------
Net loss $ (2,114,481) (1,840,068) (1,201,988)
============= ============ ============
Loss before extraordinary item (2,114,481) (1,581,443) (1,201,988)

Preferred dividend (140,000) (140,000) (133,287)
------------- ------------ ------------
Loss before extraordinary item available
to common shareholders $ (2,254,481) (1,721,443) (1,335,275)
============= ============ ============
Basic and diluted loss per common share:
Loss before extraordinary item available to
common shareholders (0.80) (0.61) (0.54)
Extraordinary item - (0.09) -
------------- ------------ ------------
Net loss per common share available to
common shareholders $ (0.80) (0.70) (0.54)
============= ============ ============
Weighted average common shares outstanding:
Basic and dilutive 2,824,868 2,842,367 2,451,683
============= ============ ============
See accompanying notes to consolidated financial statements.

LUCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996

Preferred Stock Common Stock
----------------------- ------------------------------------
Number of Shares Additional
Number ------------------------ paid-in
of shares Par value Class "A" Class "B" Par value capital
---------------------- ---------- ---------- ----------- ------------

Balance at December 31, 1995 - $ 1,243,256 702,155 $ 38,907 2,904,254
Stock issued for directors' fees (note 12) - - 1,000 - 20 7,480
Exercise of stock options (note 12) - - 2,000 - 40 10,460
Sale of stock to directors (note 9) - - 55,000 - 1,100 342,650
Sale of stock to Pennzoil (note 9) - - 759,477 - 15,190 4,986,998
Repurchase of shares (note 9) - - - - - -
Purchase of Lansing units (notes 7 and 9) - - 39,000 - 780 249,220
Capital contribution (note 5) - - - - - 500,000
Net loss - - - - - -
Preferred dividend (note 10) - - - - - -
-------- ------------ ---------- --------- ----------- -----------
Balance at December 31, 1996 - - 2,099,733 702,155 56,037 9,001,062
Stock issued for directors' fees (note 12) - - 1,000 - 20 2,730
Sale of stock to directors (note 9) - - 45,000 - 900 257,850
Capital contribution (note 5) - - - - - 338,000
Net loss - - - - - -
Preferred dividend (note 10) - - - - - -
-------- ------------ ---------- --------- ----------- -----------
Balance at December 31, 1997 - - 2,145,733 702,155 56,957 9,599,642
Repurchase of shares (note 9) - - (39,000) - (780) (274,220)
Exchange of shares (note 9) - - 200,000 (200,000) - -
Stock issued for employee bonuses
and directors' fees (note 12) - - 9,400 - 188 49,837
Net loss - - - - - -
Preferred dividend (note 10) - - - - - -
-------- ------------ ---------- --------- ----------- -----------
Balance at December 31, 1998 - $ - 2,316,133 502,155 $ 56,365 9,375,259
======== ============ ========== ========= =========== ===========

Treasury Stock
----------------------- Retained
Number earnings
of shares Cost (deficit)
--------- --------- ------------

Balance at December 31, 1995 - - 1,269,591
Stock issued for directors' fees (note 12) - - -
Exercise of stock options (note 12) - - -
Sale of stock to directors (note 9) - - -
Sale of stock to Pennzoil (note 9) - - -
Repurchase of shares (note 9) 760 (3,437) -
Purchase of Lansing units (notes 7 and 9) - - -
Capital contribution (note 5) - - -
Net loss - - (1,201,988)
Preferred dividend (note 10) - - (133,287)
------ --------- -----------
Balance at December 31, 1996 760 (3,437) (65,684)
Stock issued for directors' fees (note 12) - - -
Sale of stock to directors (note 9) - - -
Capital contribution (note 5) - - -
Net loss - - (1,840,068)
Preferred dividend (note 10) - - (140,000)
------ --------- -----------
Balance at December 31, 1997 760 (3,437) (2,045,752)
Repurchase of shares (note 9) - - -
Exchange of shares (note 9) - - -
Stock issued for employee bonuses - - -
and directors' fees (note 12) - - -
Net loss - - (2,114,481)
Preferred dividend (note 10) - - (140,000)
------ --------- -----------
Balance at December 31, 1998 760 (3,437) (4,300,233)
====== ========= ===========

See accompanying notes to consolidated financial statements.

LUCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996

1998 1997 1996
------------- ------------ ------------

Cash flows from operations:
Net loss $ (2,114,481) (1,840,068) (1,201,988)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Gain on sale of property and equipment (229) (1,200) (47,942)
Depreciation of property and equipment 1,410,487 1,272,583 1,149,028
Amortization of intangible assets and pre-operating costs 806,879 783,476 852,272
Loss on impaired assets 1,383,475 - -
Write-off of loan origination costs - 391,625 -
Stock issued as employee bonuses and
directors' fees 50,025 2,750 7,500
Management fee recorded as contributed capital - 338,000 500,000
Changes in assets and liabilities excluding effects of acquisition:
Increase in accounts receivable, trade (1,577) (59,811) (103,013)
Decrease (increase) in accounts receivable, other (359,863) 168,858 (156,639)
Decrease (increase) in inventories 181,503 (305,522) (623,924)
Decrease (increase) prepaid expenses (193,895) 87,244 (70,585)
Decrease (increase) in income tax receivable 426,282 89,841 (325,356)
Increase in accounts payable and accrued
expenses 858,352 84,057 1,404,428
Decrease (increase) in deferred tax liability 189,000 (234,594) 293,357
------------- ------------ ------------
Net cash provided by operating activities 2,635,958 777,239 1,677,138
------------- ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (3,231,300) (3,101,160) (9,166,303)
Acquisition of additional service centers and related assets (14,100,861) (45,000) (1,548,191)
Acquisition of area development agreement
and other intangible assets (303,881) (140,817) (333,556)
Decrease (increase) in deposits (6,423) 22,405 (19,649)
Pre-opening costs (66,840) (197,737) (696,422)
Proceeds from sale of property and equipment 988,376 2,504,437 173,950
Deferred gain (54,707) - -
------------- ------------ ------------
Net cash used in investing activities (16,775,636) (957,872) (11,590,171)
------------- ------------ ------------
Cash flows from financing activities:
Proceeds from the exercise of stock options - - 10,500
Repurchase of common stock (275,000) - (3,437)
Proceeds from issuance of common stock - 258,750 5,345,938
Loan origination costs (424,188) (680,190) -
Dividend paid (140,000) (140,000) (133,287)
Repayments of capital lease (25,481) (22,662) (3,526)
Proceeds from borrowings 17,320,557 16,713,298 4,719,981
Repayments of debt (594,769) (16,452,562) (315,203)
------------- ------------ ------------
Net cash (used in) provided by financing activities 15,861,119 (323,366) 9,620,966
------------- ------------ ------------
Increase (decrease) in cash and cash equivalents 1,721,441 (503,999) (292,067)

Cash and cash equivalents at beginning of year 1,548,418 2,052,417 2,344,484
------------- ------------ ------------
Cash and cash equivalents at end of year $ 3,269,859 1,548,418 2,052,417
============= ============ ============

LUCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996

1998 1997 1996
------------ ----------- -----------

Supplementary disclosures:
Interest paid, net of amounts capitalized $ 2,430,559 1,480,679 1,052,041
============ =========== ===========
Income tax paid $ 17,500 41,031 23,425
============ =========== ===========
Acquisition of units:
Accounts receivable acquired 61,193 - -
Inventory acquired 445,276 - 82,432
Prepaid expenses acquired 43,503 - -
Franchise and operating rights acquired 8,887,690 - -
Leasehold rights and franchise fees acquired 872,269 - -
Fair value of other assets acquired,
principally property and equipment 2,188,499 7,490 293,318
Value of stock issued - - (250,000)
Goodwill 1,603,548 37,510 1,422,441
Expenses (1,117) - -
------------ ----------- -----------
Cash paid, net of cash acquired $14,100,861 45,000 1,548,191
============ =========== ===========

Supplementary schedule of non-cash financing
and investing activities:
Unreleased proceeds from borrowings, included
in accounts receivable, other $ - 1,885,702 -
============ =========== ===========
Capital lease $ - - 75,300
============ =========== ===========
During 1998, the Company transferred $324,410 from property and
equipment into various asset accounts.

See accompanying notes to consolidated financial statements.

LUCOR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997

(1) Nature of Business

Lucor, Inc. (the "Company") is the largest franchisee of Jiffy Lube
International, Inc. ("JLI") in the United States. These franchises consist of
automotive fast oil change, fluid maintenance, lubrication, and general
preventative maintenance service centers under the name "Jiffy Lube". As of
December 31, 1998, the Company operated one hundred twenty-eight service
centers in seven states, including twenty-seven service centers in the Raleigh-
Durham, North Carolina DMA (Geographic Designated Market Area defined in the
Arbitron Ratings Guide for television markets), twenty-two service centers in
the Cincinnati, Ohio DMA (which includes northern Kentucky), twenty service
centers in the Pittsburgh, Pennsylvania DMA, fifteen service centers in the
Dayton, Ohio area, five service centers in the Toledo, Ohio area, eleven
service centers in the Nashville, Tennessee area, seven service centers in the
Lansing, Michigan area and twenty-one service centers in the Richmond and
Tidewater, Virginia DMA. The operations of the service centers in each of
these markets are conducted through subsidiaries of the Company, each of which
has entered into area development (except for Lansing) and franchise agreements
with JLI. These franchise agreements generally require a monthly royalty fee
of 5% of sales. The royalty fee is reduced to 4% of sales when the fee for a
given month is paid in full by the fifteenth of the following month, a practice
followed by the Company. The Company purchases, leases as well as constructs
these service centers. The Company operated one hundred and ninety-four service
centers at December 31, 1997 and 1996, respectively.

(2) Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and all of its wholly-owned subsidiaries. Intercompany transactions
and balances have been eliminated upon consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.

Inventories

Inventories of oil, lubricants and other automobile supplies are stated at the
lower of cost (first-in, first-out) or market.

Property and Equipment

Property and equipment are recorded at cost. The Company changed its method of
depreciation for equipment, signs, furniture and fixtures and point of sales
systems from the double declining balance method to the straight-line method
for assets purchased since 1996. In addition, during 1996 the Company changed
the life over which equipment purchased since 1996 is depreciated from five
years to a ten year depreciable life. Management made these changes to reflect
more closely the life of the assets and their depreciating value over the
periods. The change in the method and lives of depreciating equipment
increased net income by $463,389 in 1996. Costs of construction of certain
long-lived assets include capitalized interest which is amortized over the
estimated useful lives of the related assets. No interest was capitalized in
1997 and 1998.

Intangible Assets

The Company evaluates, when circumstances warrant, the recoverability of its
goodwill on the basis of undiscounted cash flow projections and through the use
of various other measures, which include, among other things, a review of its
image, market share and business plans.

The costs related to franchise and operating rights, goodwill, license fees and
acquisition/application fees are capitalized based on fair market values and
amortized over the related franchise terms.

The costs related to area development and non-compete agreements are
capitalized and amortized over the related agreement term.

The costs related to the issuance of debt are capitalized and amortized over
the lives of the related debt.

Amortization of other assets is being computed using the straight-line method
over the following lives:

Lives
(Years)
--------------
Franchise and operating rights 31
Goodwill 15, 20 and 40
License fees 10, 15 and 20
Area development agreement 4.5, 10 and 13
Acquisition/Application fees 20 and 40
Loan acquisition costs 15 and 25
Non-compete agreements 2, 5 and 10
Pre-opening costs 0.5
Legal costs 12

Useful lives of pre-opening costs incurred subsequent to January 1, 1996 were
shortened from two years to six months, resulting in additional amortization
expense during the year ended December 31, 1996 of $358,262.

Income Taxes

Income taxes are accounted for under the asset and liability method. 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 and operating
loss and tax credit carryforwards. 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. 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.

Advertising

The Company expenses the cost of advertising as incurred.

Basic and Diluted Loss Per Common Share

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"),
which establishes new standards for computing and presenting basic and diluted
earnings per share. As required by SFAS No. 128, the Company adopted the
provisions of the new standard with retroactive effect beginning in 1997.
Accordingly, all net loss per common share amounts for all prior periods have
been restated to comply with SFAS No. 128.

The basic loss per common share has been computed based upon the weighted
average of shares of common stock outstanding. Diluted loss per common share
has been computed based upon the weighted average of shares of common stock
outstanding and shares that would have been outstanding assuming the issuance
of common stock for all dilutive potential common stock outstanding. The
Company's outstanding stock options and warrants represent the only dilutive
potential common stock outstanding. The amounts of loss used in the
calculations of diluted and basic loss per common share were the same for all
the years presented. Diluted net loss per common share is equal to the basic
net loss per common share for the years ended December 31, 1998, 1997 and 1996,
as common equivalent shares from stock options of 423,750 and stock warrants of
130,000 would have an antidilutive effect.

Stock Options

The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123") Accounting for Stock-Based Compensation. As permitted under this
standard, the Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees in accounting for its stock
options and other stock-based employee awards. Pro forma information regarding
net loss and loss per share, as calculated under the provisions of SFAS 123,
are disclosed in note 12.

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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

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
Statement of Financial Accounting Standard 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 or fair value less
costs to sell.

Reclassifications

Certain accounts included in the 1997 financial statements have been
reclassified to conform to the 1998 presentation. These reclassifications have
no effect on net loss or stockholders' equity as previously reported.

(3) Property and Equipment

Major classifications of property and equipment together with their estimated
useful lives are summarized below:

Lives
1998 1997 (years)
------------- ------------ -----------
Land $ 3,661,366 3,829,760 N/A
Buildings 11,442,106 11,289,116 31.5
Point of sale systems and computer
hardware 542,766 364,930 5 and 7
Equipment 7,177,924 6,124,165 5 and 10
Furniture and fixtures 555,172 378,699 7
Signs 771,127 594,626 7
Transportation Equipment 408,008 322,471 5
Leashold improvement 3,722,106 2,937,620 31.5 or
lease term
Software 75,300 75,300 Lease term
Construction in progress,
including related land 583,763 395,062 N/A
-------------- -----------
28,939,638 26,311,749
Accumulated depreciation (5,646,712) (4,472,430)
-------------- -----------
$ 23,292,926 21,839,319
============== ===========

(4) Income Taxes

The components of income tax expense (benefit) attributable to loss before
income taxes and extraordinary item for the years ended December 31, 1998, 1997
and 1996 consisted of the following:

1998 1997 1996
-------------- ------------ ------------
Current:
Federal $ - (439,000) (556,364)
State 15,983 - -
-------------- ------------ ------------
15,983 (439,000) (556,364)
-------------- ------------ ------------
Deferred:
Federal (305,000) (183,507) 230,466
State 116,000 81,912 62,892
-------------- ------------ ------------
(189,000) (101,595) 293,358
-------------- ------------ ------------
Total $ (173,017) (540,595) (263,006)
============== ============ ============

The components of deferred tax assets and deferred tax liabilities as of
December 31, 1998 and 1997 are as follows:

1998 1997
------------ -------------
Deferred tax assets:
Reserves $ 571,000 -
Allowance for doubtful receivable 24,000 16,000
State net economic loss carryforwards 475,000 389,000
Federal net operating loss carryforward 1,712,000 966,000
Tax credit carryforward 56,000 62,000
------------- ------------
Total gross deferred tax assets 2,838,000 1,433,000
Less valuation allowance (971,000) (307,000)
------------- ------------
Net deferred tax assets 1,867,000 1,126,000
------------- ------------
Deferred tax liabilities:
Depreciation (1,867,000) (1,315,000)
------------- ------------
Total gross deferred tax liabilities (1,867,000) (1,315,000)
------------- ------------
Net deferred tax liability $ - (189,000)
============= ============

It is management's opinion that it is more likely than not that the net
deferred tax assets will be realized. This conclusion is based on the fact
that the tax credit carryforwards are available indefinitely, there is a
fifteen year carryforward period for the federal net operating loss
carryforward and for a portion of the state net economic loss carryforward and
the reversal of the gross deferred tax liabilities. A valuation allowance has
been recorded relating to state loss carryforwards that expire in three to five
years.

At December 31, 1998, the Company has net operating loss carryforwards for
federal income tax purposes of $5,037,000 which are available to offset future
federal taxable income, if any, through 2018. In addition, the Company has
alternative minimum tax credit carryforwards of $56,000 which are available to
reduce future federal regular income taxes, if any, over an indefinite period.

The reasons for the difference between actual income tax benefit attributable
to loss before extraordinary item for the years ended December 31, 1998, 1997
and 1996 and the amount computed by applying the statutory federal income tax
rate to loss before income taxes are as follows:

1998 1997 1996
------------------- --------------------- ----------------------
% of % of % of
pretax pretax pretax
Amount loss Amount loss Amount loss
----------- ------- ----------- --------- ------------ -------

Income tax benefit
at statutory rate $ 777,749 34.0% $ 721,493 34.0% $ 498,098 34.0%
State income
taxes, net of
federal income
tax benefit (87,109) (3.8) (54,062) (2.5) (41,509) (2.8)
Increase in
valuation
allowance (500,000) (21.9) - - - -
Nondeductible
management fee - - (114,920) (5.4) (170,000) (11.6)
Other, net (17,623) (0.8) (11,916) (0.6) (23,583) (1.6)
----------- ------- ----------- --------- ------------ -------
Income tax benefit $ 173,017 7.6% $ 540,595 25.5% $ 263,006 18.0%
=========== ======= =========== ========= ============ =======

(5) Related Party Transactions

Prior to 1998, the Company, through its subsidiaries, entered into management
agreements with CFA Management, Inc. ("CFA") which was owned by certain
stockholders of the Company, to operate, manage and maintain the subsidiaries'
service centers. On December 1, 1997, CFA assigned its management agreement
with the Company to Navigator Management, Inc, which is owned by certain
stockholders of the Company. These management agreements expire on various
dates through 2002 but may be extended. For its services, Navigator
Management, Inc. receives a percentage of annual gross sales calculated on the
basis of all service centers as follows:

Number of Management fee
service centers per service center
--------------- ------------------
1 - 34 4.50%
35 - 70 3.00%
71 - 100 2.25%
More than 100 1.50%

Management fees paid to related parties in 1998, 1997 and 1996 were $1,402,919,
$1,231,377 and $804,815, respectively.

During 1997 and 1996, CFA agreed to reduce its management fees by $338,000 and
$500,000, respectively. The Company accounted for the reduction of management
fees as capital contributions. There was no such reduction during 1998.

Included in accrued expenses payable at December 31, 1998 and 1997 were amounts
due to Navigator Management, Inc. of $444,450 and $125,284, respectively.

In 1997, the Company began purchasing gasoline and engine additive products,
wiper blades, windshield glass treatment and other automotive products from
O.H. Distributors, Inc., which is owned by stockholders of the Company.
Purchases of these products amounted to $1,624,381 and $1,243,792 in 1998 and
1997, respectively. Included in accounts payable at December 31, 1998 and 1997
were amounts due to O.H. Distributors, Inc. of $81,719 and $284,916,
respectively.

In 1996, the Company purchased gasoline additive products in the amount of
$250,964 from Oil Handlers, Inc., which is also owned by stockholders of the
Company.

The Company purchased oil, oil filters and other inventory items from Pennzoil-
Quaker State Company ("PQSC") (previously Pennzoil Products Company PPC) in the
amount of $5,883,516, $5,850,747 and $3,957,925 during the years ended December
31, 1998, 1997 and 1996, respectively. In addition to these purchases, the
Company paid rent in the amount of $196,116, $146,902 and $92,556, and
dividends on preferred stock of $140,000, $140,000 and $133,287 to PQSC during
the years ended December 31, 1998, 1997 and 1996, respectively. Included in
accounts payable at December 31, 1998 and 1997 were amounts due to PQSC of
$937,631 and $1,180,945, respectively. Also included in accrued expenses at
both December 31, 1998 and 1997 was $35,000 for preferred dividends due to
PQSC.

The Company enters into transactions with Jiffy Lube International ("JLI"), a
subsidiary of PQSC. These transactions include payments for royalties,
operating expenses, and license fees. In addition, JLI enters into
transactions to credit the Company for national fleet accounts, rebates for
grand openings, and charges for Sears credit cards. The net amount of these
transactions were receipts of $212,753 from JLI in 1998 and payments of
$165,476 and $549,359 to JLI in 1997 and 1996, respectively due to PQSC. In
addition to these transactions, the Company paid rent in the amount of
$1,835,540, $1,660,954 and $2,160,160 to JLI during the years ended December
31, 1998, 1997 and 1996, respectively. At December 31, 1998 and 1997, amounts
receivable from JLI included $384,328 and $149,328, respectively. Included in
accrued expenses at December 31, 1998 and 1997 were amounts due to JLI for
royalties of $185,002 and $142,371, respectively.

(6) Long-Term Debt

Long-term debt consists of:

December 31,
----------------------------------
1998 1997
--------------- ---------------

Notes payable, Enterprise Mortgage Acceptance
Corporation, in monthly installments of $107,740,
including interest at 8.54%, to maturity date of
April 2013, secured by real property of the
Company (a) $ 10,668,428 -

Notes payable, Enterprise Mortgage Acceptance
Corporation, in monthly installments of $89,701,
including interest at 8.76%, to maturity date of
January 2023, secured by real property of the
Company (b) 10,276,792 10,871,000

Notes payable, Enterprise Mortgage Acceptance
Corporation, in monthly installments of $71,365,
including interest at 8.76%, to maturity date of January
2013, secured by real property of the Company (b) 7,425,673 7,078,000

Note payable, Enterprise Mortgage Acceptance
Corporation, in monthly installments of $17,923,
including interest at 8.67%, to maturity date of
of January 2013, secured by real property of the
Company (c) 1,761,574 -

Notes payable, Enterprise Mortgage Acceptance
Corporation, in monthly installments of $17,796,
including interest at 8.54%, to maturity date of
February 2013, secured by real property of the
Company (d) 1,750,745 -

Note payable, Enterprise Mortgage Acceptance
Corporation, in monthly installments of $5,690,
including interest at 8.67%, to maturity date of
April 2013, secured by real property of the 559,223 -
Company (e)

Note payable, Jay C. Howell, in one balloon payment
at maturity date of February 1999, with monthly
installments of interest at 12% beginning March 1,
1997, secured by a Leasehold Mortgage and Security
Agreement and the Continuing and Unconditional
Guarantee executed by Lucor, Inc. 400,000 400,000

Note payable, Centura Bank, in 59 monthly
installments of principal of $4,290 beginning January
10, 1999, plus interest of prime plus .5% beginning
July 10, 1998 (8.25% at December 31, 1998), plus a
balloon payment at maturity date of December 2003,
secured by real property of the Company. At
December 31, 1998, the Company has drawn $373,855
of the $772,000 note (f) 373,855 -

Note payable, Centura Bank, in monthly installments
of principal of $2,267, plus interest of prime plus .5%,
to maturity date of October 2000, secured by real
property of the Company 321,854 349,058

Note payable, Pennzoil-Quaker State Company,
in one balloon payment at maturity date of July 1999,
with monthly installments of interest at 10%
beginning August 10, 1997 250,000 250,000
--------------- ---------------
33,788,144 8,948,058
Less current portion (1,675,548) (305,578)
--------------- ---------------
$ 32,112,596 18,642,480
=============== ===============

The following are the maturities at December 31, 1998 of long-term debt for
each of the next five years and in the aggregate.

1999 $ 1,675,548
2000 1,378,164
2001 1,176,346
2002 1,311,318
2003 1,506,356
Thereafter 26,740,412
--------------
$ 33,788,144
==============

During 1997, the Company repaid two notes payable to Citicorp Leasing, Inc.
with original maturity dates in 2004 and 2008. Consequently, the Company
recognized an extraordinary loss of $258,625, net of related income tax benefit
of $133,000, which represented the unamortized debt issuance costs.

In December 1998, the Company obtained a financing commitment from a lending
institution. The commitment provides financing for up to twelve service
centers and expires on December 31, 1999. The Company paid $36,000 for this
commitment.

(a) During 1998, the Company entered into 10 Loan and Security Agreements with
Enterprise Mortgage Acceptance Corporation.

The principal amount of $10,915,000 related to these loans is to be repaid
in 180 consecutive installments commencing on April 1, 1998.

These loans contain restrictive covenants pertaining to fixed charge
coverage ratios. These restrictive covenants become effective April 1,
1999.

(b) During 1997, the Company entered into 14 Loan and Security Agreements
with Enterprise Mortgage Acceptance Corporation.

The principal amount of $7,078,000 related to 9 of these loans is to be
repaid in 177 consecutive installments commencing on April 1, 1998.
Interest only payments of $51,669 were made for three months, commencing
January 1, 1998.

The principal amount of $10,871,000 related to 5 of these loans is to be
repaid in 297 consecutive installments commencing on April 1, 1998.
Interest only payments of $79,358 were made for three months, commencing
January 1, 1998.

At December 31, 1997, the Company had received approximately $16,063,000 of
the total proceeds. The remaining $1,886,000 was received in January 1998
and was included in accounts receivable, other at December 31, 1997.

These loans contain restrictive covenants pertaining to fixed charge
coverage ratios. The Company was in compliance in relation to these
covenants at December 31, 1998.

The principal amount of $1,787,000 related to this loan is to be repaid in
177 consecutive installments commencing on July 1, 1998. Interest only
payments of $12,911 were made for three months, commencing April 1, 1998.

This loan contains restrictive covenants pertaining to fixed charge
coverage ratios. These restrictive covenants become effective April 1,
1999.

(d) During 1998, the Company entered into 2 Loan and Security Agreements with
Enterprise Mortgage Acceptance Corporation.

The principal amount of $1,787,000 related to these loans is to be repaid
in 177 consecutive installments commencing on June 1, 1998. Interest only
payments of $12,717 were made for three months, commencing February 3,
1998.

These loans contain restrictive covenants pertaining to fixed charge
coverage ratios. These restrictive covenants become effective February 3,
1999.

(e) During 1998, the Company entered into a Loan and Security Agreement with
Enterprise Mortgage Acceptance Corporation.

The principal amount of $572,000 related to this loan is to be repaid in
180 consecutive installments commencing on April 1, 1998,

This loan contains restrictive covenants pertaining to fixed charge
coverage ratios. These restrictive covenants become effective April 1,
1999.

(f) In February 1999, the Company modified its note payable, entered into in
June 1998, to Centura Bank. The note was increased to $868,223, payable in
59 monthly installments of principal of $4,823 plus interest of prime plus
.5% beginning April 10, 1999. A balloon payment is due at maturity date of
March 2004. The Company used the funds to retire its 1995 corporate office
building loan and finance the expansion of its corporate office.

(7) License and Area Development Agreements

Each development agreement grants the Company exclusive rights to develop and
operate a specific number of service centers within a defined geographic area,
provided that a certain number of service centers are opened over scheduled
intervals.

Raleigh-Durham

The Company has satisfied its obligations to develop service centers under its
Area Development Agreement for the Raleigh-Durham market area, and currently
has a right of first refusal to develop any additional service centers which
JLI may propose to develop or offer to others in this market. This right
extends to December 31, 2006 in the Raleigh-Durham market.

Pittsburgh

Under its area development agreement for the Pittsburgh area, the Company has
satisfied its obligations to develop eight service centers by June 30, 2000.
The Company has the right to develop service centers in its Pittsburgh
territory through June 30, 2004. After that date, the franchisor may develop
or franchise others to develop service centers in the Company's territory but
only after providing the Company with the first right of refusal to develop any
such centers, which right extends through June 30, 2019.

Cincinnati and Other Areas

The Company has satisfied its obligations to develop service centers under its
Area Development Agreement for the Cincinnati market area, and currently has a
right of first refusal to develop any additional service centers which JLI may
propose to develop or offer to others in this market. This right extends to
December 31, 2000 in the Cincinnati market area.

On August 1, 1995, the Company amended its Area Development Agreement for the
Cincinnati market area to include Toledo, Dayton and Nashville areas and
operate a specific number of centers within the defined geographical areas
until July 31, 2004. The Company has satisfied its development obligation.
The Company has a first right of refusal to develop service centers until July
31, 2019.

Lansing

On May 1, 1996, the Company purchased substantially all of the assets of Quick
Lube, Inc. which included six service centers in the Lansing, Michigan area.
The Company has not entered into an Area Development agreement regarding
Lansing.

The franchise agreements convey the right to use the franchisor's trade names,
trademarks, and service marks with respect to specific service centers. The
franchisor also provides general construction specifications for the design,
color schemes and signage for a service center, training, operating manuals and
marketing assistance. Each franchise agreement requires the franchisee to
purchase products and supplies approved by the franchisor. The initial
franchise fee payable by the Company upon entering into a franchise agreement
for a service center varies based on the market area where the Company develops
the center and the time of development of the center. For service centers
which the Company may develop in 1999, the initial franchise fee ranges from
$12,500 to $35,000.

Richmond and Tidewater

On April 1, 1998, the Company purchased substantially all of the assets of
Tidewater Lube Ventures, Inc. and Lube Venture East, Inc., which included
twenty one Jiffy Lube service centers in the Richmond and Tidewater, Virginia
areas, and two Jiffy Lube service centers in Eastern North Carolina. The
Company was also assigned an area development agreement as part of the purchase
which requires the Company to develop one service center in each of the next
three years. The Company has a first right of refusal to develop service
centers until December 31, 2008.

The acquisition of Tidewater Lube Ventures, Inc. and Lube Ventures East, Inc.
were accounted for by the purchase method of accounting for business
combinations. Accordingly, the accompanying consolidated statements of loss do
not include any revenues or expenses related to these acquisitions prior to the
closing date. Following are the Company's unaudited pro forma results for 1998
and 1997 assuming the acquisition occurred at the beginning of each period
presented:

1998 1997
--------------- -------------
Net sales $ 58,484,516 56,106,526
Net loss (1,872,559) (288,381)
Loss before extraordinary item available to
common shareholders (2,012,559) (169,756)

Basic and diluted loss per common share:
Loss before extraordinary item available to
common shareholders (0.71) (.06)
Extraordinary item - (0.09)
--------------- -------------
Net loss per common share available to
common shareholders $ (0.71) (0.15)
=============== =============

(8) Commitments and Contingencies

During 1996, the Company leased software costing $75,300 under a capital lease
agreement which expires in 1999.

The Company has entered into operating leases for the buildings and
improvements used in the service centers. Substantially all of the leases are
net leases. Several of the leases stipulate rent increases based on various
formulas for cost of living, percentage of sales, and cost of money increases.

Future minimum lease payments under noncancellable operating leases and the
present value of future minimum capital lease payments at December 31, 1998
are:

Operating Operating
leases with leases
non-related with related Capital
parties parties leases
-------------- ----------- ----------
1999 $ 4,244,386 1,831,765 24,924
2000 4,192,186 1,825,739 -
2001 4,205,160 1,616,301 -
2002 4,250,682 1,576,492 -
2003 4,108,403 1,567,988 -
Thereafter 37,901,817 10,760,975 -
-------------- ----------- ----------
Total minimum lease payments $ 58,902,634 19,179,260 24,924
============== ===========
Less amounts representing
interest (at 11.76%) 1,293
----------
Present value of future
minimum lease payments,
current $ 23,631
==========

The Company sold a service center in the current year for $637,640, and leased
it back from the purchaser for a period of twenty years. The resulting lease
is being accounted for as an operating lease, and the resulting deferred gain
of $54,936 is being amortized over the life of the lease. The lease requires
the Company to observe certain operating restrictions and covenants and
contains four five-year lease renewal options by the Company.

Rent expense, including contingent rentals, for the years ended December 31,
1998, 1997 and 1996 was $5,913,642, $4,452,896 and $3,278,019, respectively.

As of December 31, 1998, 1997 and 1996, the Company had capital expenditure
purchase commitments outstanding of approximately $97,500, $177,858 and
$860,000, respectively.

On May 15, 1998, the Company entered into a consulting agreement for a period
of one year. As of December 31, 1998, the Company had compensation payment
commitments outstanding of approximately $18,180 related to this agreement.

(9) Common Stock

The Company currently has two classes of common stock authorized.

Class A common stock has one vote per share, but may be voted only in
connection with: (i) the election of directors; (ii) the sale, lease, exchange,
or other disposition of all, or substantially all, of the Company's assets; and
(iii) the removal of Navigator Management, Inc. or a successor management
company under a Management Agreement with a subsidiary. Class B shareholders
have the right to elect a majority of the Directors of the Company. All shares
of Class B common stock have equal voting rights and have one vote per share in
all matters to be voted upon by the shareholders.

Class B shareholders have preemptive rights. Upon the sale for cash of shares
of any class of common stock of the Company, each Class B shareholder has the
right to purchase that number of shares offered at the offering price, so that
Class B shareholders are entitled to maintain their overall pro rata holdings
of common stock. Holders of Class A common stock and preferred stock have no
preemptive rights.

On April 26, 1996, the Company repurchased 760 shares of Class A common stock
from employees of the Company for $3,437. The shares are recorded as treasury
stock.

On May 1, 1996, in conjunction with the Company's purchase of substantially all
of the assets of Quick Lube, Inc in the Lansing, Michigan area, the Company
sold 39,000 shares of Class A common stock to Quick Lube, Inc. at the fair
market value of $6.41 per share.

In May 1996, the Company sold 55,000 shares of Class A common stock to the
directors of the Company at the fair market value of $6.25 per share.

On June 3, 1996, the Company sold 759,477 shares of Class A common stock to PPC
at the fair market value of $6.59 per share. PQSC (previously PPC) owned 33%
and 35% of the Class A common stock at December 31, 1998 and 1997,
respectively.

On February 2, 1997, the Company sold 45,000 shares of Class A common stock to
the directors of the Company at the fair market value of $5.75 per share.

In April 1998, an officer of the Company exchanged 200,000 shares of Class B
common stock for 200,000 shares of Class A common stock.

On May 1, 1998, the Company repurchased 39,000 shares of Class A common stock
from Quick Lube, Inc. at a contractual value of $7.05. The shares were
subsequently retired.

On June 15, 1998, the Company granted warrants for the purchase of 100,000
shares of unregistered Class A common stock to a third party. The warrants are
exercisable for five years, in installments of 20% of the shares each year, at
an exercise price of $5 per share, beginning on June 15, 1998. No warrants
have been exercised as of December 31, 1998.

(10) Series A Redeemable Preferred Stock

During 1995 the Company entered into a stock purchase agreement with PPC,
whereby the Company established 20,000 shares of Series A Redeemable Preferred
Stock which were issued to PPC at a price of $100 each together with warrants
to purchase 30,000 shares of Class A common stock at a price of $15 per share.
No warrants have been exercised as of December 31, 1998.

The Company has the right and option at any time to redeem all, but not part,
of the Series A Redeemable Preferred Stock by paying in full $100 ("Redemption
Price") per share plus any accrued and unpaid dividends. At any time from and
after the seventh anniversary of the date of issuance of the Series A
redeemable Preferred Stock PQSC (previously PPC) shall have the right to cause
the Company to redeem all, but not part of the Series A Redeemable Preferred
Stock by paying the Redemption Price.

The holders of Series A Redeemable Preferred Stock shall be entitled to receive
cumulative dividends accruing from the date of issuance at the rate of $7 per
share per annum, payable semiannually on March 31, and September 30, of each
year. If, at any time, the Company fails to make a semiannual dividend payment
on any payment date for any period for which the applicable coverage ratio
exceeded 1.25 to 1 and the Company is permitted under the terms of its Credit
Facilities to pay dividends, the dividend rate shall increase by $0.50 per
share per annum. The increased dividend rate shall remain in effect until the
earlier of the date all accrued dividends are paid in full or until all
outstanding shares of Series A Redeemable preferred stock are redeemed at the
Redemption Price. The Company paid dividends of $140,000 during the years
ended December 31, 1998 and 1997, and $133,287 during the year ended December
31, 1996.

The holders of the Series A Redeemable preferred stock shall have no voting
rights. In the event of any liquidation, dissolution or winding up of the
Company, holders of each share of the Series A Redeemable preferred stock are
entitled to an amount per share equal to the original price of the Series A
Redeemable preferred stock plus accumulated dividends up through and including
the payment date before any payment shall be made to the holders of any stock
ranking on liquidation junior to the Series A Redeemable preferred stock,
including the common stock.

(11) Preferred Stock

The Company also has non-redeemable preferred stock with a par value of $0.02.
As of December 31, 1998 and 1997, 5,000,000 shares were authorized, but no
shares had been issued or were outstanding.

(12) Stock Plans

1991 Nonqualified Stock Plan

The Company has adopted a non-qualified stock plan (as amended) (1991 plan)
with 150,000 shares of Class "A" common stock reserved for the grant of stock
or options to key employees, officers and directors of the Company. Option
prices may be less than the fair market value of the common stock on the date
the options are granted. All shares granted are subject to significant
restrictions as to disposition by the optionee. During the year ended December
31, 1996, the vesting of options granted under this plan was accelerated and
the options expired on June 14, 1997. No options were granted during 1998.

Changes in the stock options authorized, granted and available under the 1991
plan are as follows:

Weighted
average
exercise
Authorized Granted price
---------- ----------- ------------
Balance at December 31, 1995 42,940 42,680 $ 5.25
Exercised (2,000) (2,000) 5.25
---------- ----------- ------------
Balance at December 31, 1996 40,940 40,680 5.25
Cancelled - (40,680) 5.25
---------- ----------- ------------
Balance at December 31, 1997
and 1998 40,940 - $ -
========== =========== ============

Proceeds received from the exercise of stock options are credited to the
Company's capital accounts.

Omnibus Stock Plan

On December 27, 1994, the Company adopted a stock award and incentive plan (the
"Plan") which permits the issuance of options, stock appreciation rights
(SARs), limited SARs, restricted stock, and other stock-based awards to
directors and employees of the Company. The Plan reserves 600,000 shares of
Class "A" common stock for grants and provides that the term of each award,
typically ten years, be determined by the committee of the board of directors
(the "Committee") charged with administering the Plan. These shares are
subject to certain transfer restrictions as determined by the committee.

Under the terms of the plan, options granted may be either nonqualified or
incentive stock options and the exercise price, determined by the committee,
may not be less than the fair market value of a share on the date of grant.
SARs and limited SARs granted in tandem with an option shall be exercisable
only to the extent the underlying option is exercisable and the grant price
shall be equal to a percent, as determined by the committee, of the amount by
which the fair market value per share of stock exceeds the exercise price of
the SAR. All stock options issued have 5 year vesting periods, and are
exercisable in 20% increments each year.

Stock option activity under the Omnibus Stock Plan during the periods indicated
is as follows:

Weighted
average
Number exercise
of options price
---------- -----------
Balance at December 31, 1995 100,000 $ 6.50
Granted 50,000 7.63
---------- -----------
Balance at December 31, 1996 150,000 6.85
Granted 326,500 5.92
Cancelled (33,750) 7.21
---------- -----------
Balance at December 31, 1997 442,750 6.14
Cancelled (19,000) 7.02
---------- -----------
Balance at December 31, 1998 423,750 $ 6.10
========== ===========

At December 31, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $5.00-$8.00 and 6.5
years, respectively.

The Company granted awards of 8,400 shares to employees during the year ended
December 31, 1998. 6,000 of the shares were granted at a price of $5.00 per
share, and 2,400 of the shares were granted at a price of $6.00 per share. No
stock awards were granted under this plan in 1997 and 1996.

At December 31, 1998, 1997 and 1996, there were 600,000 shares authorized, and
167,850, 157,250 and 450,000 shares, respectively, available under the Omnibus
Stock Plan. Of the outstanding options, 117,250, 38,500 and 30,500 were
exercisable at December 31, 1998, 1997 and 1996, and the weighted average
exercise price was $6.22, $6.61 and $6.71.

Directors' Stock Award Plan

On April 4, 1995, the Company adopted a stock award plan for the outside
directors ("Directors' Plan"). The Directors' Plan reserves 15,000 shares of
Class "A" common stock for issuance under awards to be granted under the
Directors' Plan. The Company granted awards of 1,000 shares during each of the
years ended December 31, 1998, 1997, and 1996, respectively. The shares were
granted at a price of $5.625 per share in 1998, $2.75 per share in 1997, and
$7.50 per share in 1996.

At December 31, 1998, 1997 and 1996, there were 15,000 shares authorized,
4,120, 3,120 and 2,120 granted and exercised, respectively, and 10,880, 11,880
and 12,880 available, respectively, under the Directors' Plan.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"). Accordingly, no compensation cost has been recognized for
the stock option plans. Had compensation cost for the Corporation's stock
option plans been determined based on the fair value at the grant date for
awards in 1998, 1997 and 1996 and consistent with the provisions of SFAS No.
123, the Corporation's net loss and loss per share would have been reduced to
the pro forma amounts indicated below:

As Reported Pro Forma
------------------------------------------ -----------------------------------------
1998 1997 1996 1998 1997 1996
--------------- ----------- ------------ -------------- ------------ -----------

Loss before extra-
ordinary item
available to
common
shareholders $ (2,254,481) (1,721,443) (1,335,275) (2,334,007) (1,790,685) (1,423,435)
Extraordinary
item, net of
income tax
benefit - (258,625) - - (258,625) -
--------------- ------------ ------------ -------------- ------------ ------------
Net loss available
to common
shareholders $ (2,254,481) (1,980,068) (1,335,275) (2,334,007) (2,049,310) (1,423,435)
=============== ============ ============ ============== ============ ============
Basic and diluted
loss per common
share:
Loss before
extraordinary
item available
to common
shareholders $ (.80) (.61) (.54) (.83) (.63) (.58)
Extraordinary
item - (.09) - - (.09) -
--------------- ------------ ------------ -------------- ------------ ------------
Net loss per
common share
available to
common
shareholders $ (.80) (.70) (.54) (.83) (.72) (.58)
=============== ============ ============ ============== ============ ============

The pro forma effect on net loss for 1998, 1997 and 1996 is not representative
of the pro forma effect on net loss in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1995.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

1998 1997 1996
---- ---- ----
Expected dividend yield - 0% 0%
Expected stock price volatility - 39.0% 30.1%
Risk-free interest rate - 5.69% 6.21%
Expected life of options - 5 years 5 years

The weighted average fair value of options granted during 1997 and 1996 is $.53
and $2.84, respectively, per share. No options were granted during 1998.

(13) Impairment Loss

As of December 31, 1998, the Company was operating sixteen Jiffy Lube Service
Centers within Sears Auto Centers. As a result of continued disappointing
revenue and profits generated by the service centers located in Sears, the
Company performed an impairment review of its long-lived assets, in accordance
with Statement of Financial Accounting Standard No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
During the fourth quarter of 1998, the Company determined that estimated future
undiscounted cash flows of the Sears operations were below the carrying value
of the Sears long-lived assets. Accordingly, during the fourth quarter of
1998, the Company adjusted the carrying value of the Sears long-lived assets,
primarily equipment, point of sale systems, furniture and fixtures, leasehold
improvements and franchise fees, to their estimated fair value, resulting in a
noncash impairment loss of $1,383,475 ($0.50 per share). The estimated fair
value was based on anticipated future cash flows discounted at a rate
commensurate with the risk involved.

(14) Concentration of Credit Risk

The Company maintains cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1998, cash balances in excess of the insurance
limits totalled $667,613. In addition, the Company had a cash balance of
$2,053,922 in a money market fund at December 31, 1998 which was not insured.

(15) Profit Sharing Plan

During 1994, effective for years beginning after January 1, 1995, the Company
adopted a profit sharing plan pursuant to Section 401(k) of the Internal
Revenue Code ("Code") whereby participants may contribute a percentage of
compensation, but not in excess of the maximum allowed under the Code. The
plan provides for a discretionary matching contribution by the Company.
Employees are eligible for the plan after being employed full time for six
consecutive months. For the years ended December 31, 1998, 1997 and 1996, the
Company contributed $64,492, $49,348 and $46,387, respectively, to the plan.

(16) Fair Value of Financial Instruments

The Company's financial instruments are cash and cash equivalents, notes
payable and long-term debt, and various receivables and payables. The carrying
values of these on-balance sheet financial instruments approximate fair value.

(17) Subsequent Event

In March 1999, the Company issued letters of intent to Q Lubes, Inc. and Jiffy
Lube International, Inc., wholly-owned subsidiaries of PQSC to purchase the
assets of seventy-one service centers in Georgia, Michigan, Ohio and Tennessee.
The Company anticipates financing the acquisition by obtaining additional
funding during 1999.

(18) Unaudited Quarterly Results

Unaudited quarterly financial information for 1998 and 1997 is set forth in the table below:

March June September December
---------------------- ----------------------- ----------------------- -----------------------
1998 1997 1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- --------- --------- ---------

Net sales $ 10,728 10,018 14,966 10,778 14,650 11,005 14,963 10,877

Gross profit 8,207 7,708 11,582 8,246 11,280 8,440 11,522 8,305

Preferred dividend (35) (35) (35) (35) (35) (35) (35) (35)

Income (loss) before
extraordinary item
available to common
shareholder (574) (395) 189 (205) (250) (572) (1,619) (549)

Extraordinary item, net
of income tax benefit 0 0 0 0 0 0 0 (259)

Basic loss per common
share* (0.20) (0.14) 0.07 (0.07) (0.09) (0.20) (0.57) (0.20)

Extraordinary item 0 0 0 0 0 0 0 (0.09)

* The loss before extraordinary item available to common shareholders and the basic loss per common share as previously reported
for the quarter ended September 30, 1997 were ($234) and $(0.08), respectively. The amounts reflected above include additional
expense of $338 and ($0.12) per common share for the quarter ended September 30, 1997. This additional expense is a result of
an adjustment to the management fee incurred during the third quarter.

Item 9 - Changes in and Disagreements with Accountants or Accounting and
Financial Disclosure

None

PART III

Item 10 - Directors and Executive Officers of the Registrant

Reference is made to the information set forth in the section entitled
"Election of Directors" in the Proxy Statement, which information is
incorporated herein by reference.

Reference is made to the information set forth in the section entitled
"Directors and Executive Officers" in the Proxy Statement, which information is
incorporated herein by reference.

Item 11 - Executive Compensation

Reference is made to the information set forth in the section entitled
"Executive Compensation" in the Proxy Statement, which information is
incorporated herein by reference.

Item 12 - Security Ownership of Certain Beneficial Owners and Management

Reference is made to the information set forth in the section entitled
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement, which information is incorporated herein by reference.

Item 13 - Certain Relationships and Related Transactions

Reference is made to the information set forth in the sections entitled
"Election of Directors" and "Certain Transactions" in the Proxy Statement,
which information is incorporated herein by reference

PART IV

Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report:

Financial statements and financial statement schedule - see Index to
Consolidated Financial Statements at Item 8 of this report.

(a)(3) Exhibits: Unless otherwise indicated, the following exhibits are
incorporated herein by reference from the Registrant's Registration Statement
on Form S-1, File No. 33-71630 under the same exhibit reference number, and are
made a part hereof by such reference.

Exhibit
Number Exhibit Description

3.1 Articles of Incorporation
3.2 By-Laws of the Registrant
3.3 Amendment to Articles of Incorporation
3.4 Amendment to Articles of Incorporation dated June 27, 1994
4.1 Form of Warrant Agreement
4.2 Form of Common Stock Certificate
4.3 Form of Warrant Certificate
10.1 Area Development Agreement - Carolina Lubes, Inc.
10.2 Right of First Refusal - Carolina Lubes, Inc.
10.3 (1) Area Development Agreement and Amendment - Cincinnati Lubes,
Inc.
10.4 Omitted. This agreement is disclosed in exhibits 10.5 and
10.6
10.5 Standard License Agreement
10.6 Amendment to Standard License Agreement
10.7 (2) Amended and Restated Management Agreement of August 1988,
with Amendments of September 1993 with Carolina Lubes, Inc.,
Cincinnati Lubes, Inc. and CFA Management, Inc.
10.8 (3) Deed, Note & Loan Agreement, Millbrook - Carolina Lubes, Inc.
10.12 (4) Area Development Agreement, Jiffy Lube - Pittsburgh Lubes
10.13 (5) Management Agreement between Pittsburgh Lubes, Inc. and CFA
Management, Inc.
10.14 (6) Lucor, Inc. Omnibus Stock Plan
10.15 (7) Carolina Lubes First Right of Refusal Agreement with Jiffy
Lube International, Inc. dated December 12, 1994
10.16 (8) Commercial Note - Centura Bank, Pershing Road
10.17 (9) Assignment and Assumption Agreement - P.B. Lubes and
Carolina Lubes
10.18 (10) Lucor, Inc. Amended and Restated 1991 Non-Qualified Stock
Plan
10.20 Standard Lease of Inspection Equipment - Carolina Lubes
10.21 (11) Citicorp Leasing Credit Facility form of preferred stock
with designation of rights, and form of Sales Agreement
10.23 Franchise Agreement, Jiffy Lube - Pittsburgh Lubes
Inc. and CFA Management, Inc. dated July 1, 1994
10.24 (12) Form of Loan Agreements with Enterprise Mortgage Acceptance
Company, LLC
10.25 (12) Amendment to the Management Agreement between Carolina Lubes,
Inc. and CFA Management, Inc.
10.26 (12) Amendment to the Management Agreement between Cincinnati
Lubes, Inc. and CFA Management, Inc.
10.27 (12) Amendment to the Management Agreement between Pittsburgh
Lubes, Inc. and CFA Management, Inc.
10.28 * Management Agreement between Commonwealth Lubes, Inc. and
Navigator Management Inc.
21 * Subsidiaries of the Company
27 * Financial Data Schedule

* Filed herewith.

(1) Originally filed as Exhibits 10.3 and 10.4 on Registrant's Registration
Statement on Form S-1, File No. 33-71630.
(2) Originally filed as Exhibit 10.8 on Registrant's Registration Statement on
Form S-1, File No. 33-71630.
(3) Originally filed as Exhibit 10.14 on Registrant's Registration Statement on
Form S-1, File No. 33-71630.
(4) Originally filed as Exhibit 10.24 on Registrant's Registration Statement on
Form S-1, File No. 33-71630.
(5) Originally filed as Exhibit 10.25 on Registrant's Registration Statement on
Form S-1, File No. 33-71630.
(6) Originally filed as Exhibit 10.26 on Registrant's Form 10-K filed for the
year ended December 31, 1994.
(7) Originally filed as Exhibit 10.27 on Registrant's Form 10-K filed for the
year ended December 31, 1994.
(8) Originally filed as Exhibit 10.16 on Registrant's Form 10-K filed for the
year ended December 31, 1995.
(9) Originally filed as Exhibit 10.17 on Registrant's Form 10-K filed for the
year ended December 31, 1995.
(10) Originally filed as Exhibit 10.18 on Registrant's Form 10-K filed for the
year ended December 31, 1994.
(11) Originally filed as Exhibit 10.6 on Registrant's Form 10-K filed for the
year ended December 31, 1995.
(12) Filed with original filing of the Registrant's Form 10-K for the year ended
December 31, 1997.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

LUCOR, INC.

/s/ Stephen P. Conway
By __________________________________
Stephen P. Conway, Chairman and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on the 31st day of March, 1999.

/s/ Stephen P. Conway
__________________________ Chairman, Chief Executive Officer and Director
Stephen P. Conway (Principal Executive Officer)

/s/ Jerry B. Conway
__________________________ President, Chief Operating Officer and Director
Jerry B. Conway

/s/ Kendall A. Carr
__________________________ Vice President - Finance
Kendall A. Carr (Principal Financial Officer and Principal
Accounting Officer

/s/ D. Fredrico Fazio
__________________________ Director
D. Fredrico Fazio

__________________________ Director
Anthony J. Beisler, III

EXHIBIT 21

Lucor, Inc
Subsidiaries of the Company

Carolina Lubes, Inc.
Cincinnati Lubes, Inc.
Commonwealth Lubes, Inc.
Pittsburgh Lubes, Inc.
PB Lubes, Inc.
Ohio Lubes, Inc.
Tennessee Lubes, Inc.