The owner of Young Laundry & Dry Cleaning has begun the initial public offering of its stock, raising to date almost $4 million to fund its expansion here and on the Mainland.

U.S. Dry Cleaning Corp. of Palm Springs, Calif., said it may still sell more shares. It has a total of 3 million units to be sold, each of which sells for $2.50 and consists of one share of common stock and a warrant that allows the purchase of another share of stock at a future date.

Two years ago U.S. Dry Cleaning bought Young Laundry, Hawai'i's largest retail and commercial dry-cleaner and laundry, and formulated ambitious plans to build similar regional operations elsewhere. Mike Drace, who oversees Young's operations, also serves as president and chief operating officer of U.S. Dry Cleaning, which operates a chain of dry cleaning stores in California.

Yesterday U.S. Dry Cleaning said it may sell as much as $7.5 million of units through the IPO, which is being underwritten by US EURO Securities Inc., an investment bank in Perdido Key, Fla. Some of the shares are being marketed locally by the Hawai'i offices of Brookstreet Securities Corp.

Warren Woon, a Brookstreet investment consultant, said he believes the offering may reach the maximum.

"I'm actually writing more tickets than I actually asked for," said Woon, noting he probably has sold 50 percent more units than he was allotted.

Buyers are subscribing to the shares despite U.S. Dry Cleaning's money-losing history.

The company in the year ending Sept. 30 had a net loss of $8.4 million. The so-called penny stock is scheduled to trade on Nasdaq's over-the-counter bulletin board after the the offering is completed.

Woon said the losses occurred as U.S. Dry Cleaning made acquisitions and that the red ink should recede with more purchases of dry cleaning chains.

U.S. Dry Cleaning wants to replicate Young Laundry's hub-and-spoke system where the company achieves economies of scale for a central processing plant by acquiring retail locations within the region. It sees the nation's dry cleaning industry as ripe for consolidation of its mostly small operations.

"With the pace of acquisitions it's progressing at, it should be able to report positive income," Woon said.

U.S. Dry Cleaning declined comment beyond what was included in a press release.

According to the International Fabricare Institute, a dry cleaning industry organization, there are about 30,000 dry cleaners in the United States, many of which are single-location "mom-and-pop" operations.

U.S. Dry Cleaning, in regulatory filings estimates from IBIS World, said the entire U.S. dry cleaning business generates about $9 billion in sales annually.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.