GEOGRAPHICS INC, 10-K405/A, 1996-11-25

GEOGRAPHICS INC
10-K405/A, 1996-11-25
PAPER & PAPER PRODUCTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

AMENDMENT NO. 1 TO FORM 10-KSB
ON FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

For the Fiscal Year Ended MARCH 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _____________to______________

Commission File Number: 0-26756

GEOGRAPHICS, INC.
(Exact name of registrant as specified in its charter)

Wyoming 87-0305614
------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

1555 Odell Road, P.O. Box 1750, Blaine, WA 98231
------------------------------------------- -----
(Address of principal executive offices) (Zip code)

Registrant's telephone number including area code: (360) 332-6711

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

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

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON SHARES, NO PAR VALUE NASDAQ NATIONAL MARKET SYSTEM

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. ___X____ Yes ________ 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 bet
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

Common stock, no par value per share ("Common Stock"), was the only class of
voting stock of the Registrant outstanding on November 15, 1996. Based on the
closing bid price of the Common Stock on the NASDAQ National Market System as
reported on November 15, 1996 of $2.94, the aggregate market value of the
5,524,380 shares of the Common Stock held by persons other than officers,
directors and persons known to the Registrant to be the beneficial owner (as
that term is defined under the rules of the Securities and Exchange Commission)
of more than five percent of the Common Stock on that date was approximately
$15,882,593. By the foregoing statements, the Registrant does not intend to
imply that any of these officers, directors or beneficial owners are affiliates
of the Registrant or that the aggregate market value, as computed pursuant to
rules of the Securities and Exchange Commission, is in any way indicative of the
amount which could be obtained for such shares of Common Stock.

The number of Common Shares, no par value, of the Registrant outstanding as of
November 15, 1996 was 9,416,877.

Transitional Small Business Disclosure Format (Check one): Yes_____ No __X__

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

Document Part of Annual Report
-------- ---------------------
Portions of the General Form for Registration of Part IV - Item 14
Securities Pursuant to Section 12(b) and 12(g)
of the '34 Act.

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Geographics, Inc. was incorporated as a Wyoming corporation on September
20, 1974. The Registrant and its subsidiaries are hereinafter collectively
referred to as the Company, unless otherwise noted. The Company is engaged in
the development, manufacture, marketing, and distribution of designer
stationery, value added papers (printed business cards, brochures, letterhead,
memo pads and paper cubes), lettering, signage, stencil and graphic art products
throughout the United States, Canada, Australia, Europe, Israel and Mexico.

The Company's fiscal year end is March 31. The Company's executive offices
and domestic operations are located at 1555 Odell Road, Blaine, Washington
98231, and its telephone number is (360) 332-6711.

The Company conducts its export operations through three subsidiaries and a
partnership:

- - Geographics Marketing Canada, Inc. was incorporated as a British Columbia,
Canada corporation on July 31, 1995. Its offices are located at 17735 1st
Ave., Suite 1, Surrey, B.C. V4P 2K1, Canada, and its telephone number is
800-426-5923. Geographics Marketing Canada, Inc. was established to import
the Company's products into Canada and market them to wholesale and retail
distribution channels. Geographics Marketing Canada, Inc. succeeds Martin
Distribution as the exclusive importer of Geographics products into Canada
effective April 1, 1996. For further discussion of Martin Distribution see,
"Certain Relationships and Related Transactions."

- - Geographics (Europe) Limited was incorporated in England on December 12,
1995. Geographics (Europe) Limited offices are located at 4 Iceni Court,
Letchworth, Herts SG6 1TN, England, and its telephone number is 01462-487100.
Geographics (Europe) Limited was established to import, warehouse, market and
distribute the Company's products throughout Europe.

- - Geographics Australia Pty. Ltd. ("GAPL") was incorporated in Brisbane,
Australia on June 28, 1996. GAPL's principal offices are located at 3/32
Lillian Fowler Place, Marrickville NSW 2204, Australia and its telephone
number is 61-2-9519-4488. GAPL was organized to import, warehouse, market and
distribute the Company's products throughout Australia.

- - International Geographics of Ontario ("IGO")was established in September
1989, with the Company owning 70% of the partnership and a marketing agent
for the Company owning the remaining 30%. The purpose of IGO was to purchase
the Company's products from Martin Distribution Inc. and market and
distribute the Company's products in Canada. IGO was dissolved during fiscal
1996. The Company is in the process of winding up the affairs of the
partnership. The functions of IGO have been assumed by Geographics Marketing
Canada Inc. IGO's principal offices are located at 921 Gana Court,
Mississauga, ON, Canada L5S 1N9, and its telephone number is 800-426-5923.

BACKGROUND

At the time of its incorporation in 1974, the Company was a wholly owned
subsidiary of International Geographics Ltd. ("IGL"), a British Columbia
corporation traded on the Vancouver Stock Exchange. On February 20, 1989 IGL
listed its stock on the Toronto Stock Exchange and voluntarily de-listed its
common stock from the Vancouver Stock Exchange.

The Company's primary focus during this period was the manufacture and
marketing of rub on and stick on lettering, signage and graphic art products.
These products were manufactured in various locations until 1980 when the
Company consolidated its manufacturing facilities and moved to Blaine,
Washington.

During 1991, a reorganization of the Geographics group of companies was
conducted whereby Geographics, Inc. undertook and completed a takeover bid to
acquire all of the issued and outstanding shares of

<PAGE>

IGL. As a result, Geographics, Inc. acquired its parent and became a U.S. based
company, with both of its administrative offices and manufacturing facilities
located at one location, within a single entity.

During fiscal year 1991, the Company began the development of designer
stationary and value added paper products. In fiscal year 1992 the Company
introduced to the marketplace the first versions of Geopaper, a value added
paper. The Company continued to develop new Geopaper designs and new Geopaper
customers, and by fiscal year 1994 sales of Geopaper had increased to 3% of
total Company sales.

In fiscal year 1994, the Company purchased certain assets from E.Z.
Industries Inc. (an unrelated Maryland company), for $1,500,000. The purchased
assets included equipment used in the manufacturing of vinyl letter sets,
stencil kits, lettering guides, dry transfers, signs and similar products,
however, primary purpose of the acquisition was to broaden the Company's
customer base.

The Company successfully placed Geopaper in Office Depot Inc., a major
office supply superstore in fiscal year 1995. Sales of Geopaper during fiscal
year 1995 increased to 21% of total Company sales. During first quarter of
fiscal year 1996, the Company received purchase orders to place Geopaper chain
wide in Office Depot and OfficeMax, two of the three largest office supply
superstores in North America. In January 1996, the Company announced that
Wal-Mart had agreed to place Geopaper in 248 Wal-Mart stores to be shipped in
March 1996.

During fiscal year 1996, the Company introduced new variations of Geopaper,
including Geonotes and Geocubes, memo pad and paper cube products made using
Geopaper designs. As a result of the increasing popularity of Geopaper in the
retail stores and the expansion of the Geopaper product line, sales of Geopaper
products had increased to 65% of total Company sales. Fiscal year 1996 was the
year the Company made the transition from a lettering and signage manufacturing
company to a manufacturer of stationary and value added papers as its primary
business.

PRODUCTS

The products manufactured by the Company are separated into two major
product groups; (1) specialty papers, and (2) lettering and signage.

The specialty papers group is composed primarily of designer stationery and
other value added papers (paper on which the Company has applied photographs and
art images during a printing process and then cut to size). The papers are
designed for use in photocopiers and computer printers to be used as stationery,
letterhead, business cards, brochures, memo pads and paper cubes. These papers
are marketed under the Trademark "Geopaper". Geopaper products are also designed
to be used with personal computer printers or to compliment other Company
products that are used with personal computers. Geopaper sales increased to 65%
of sales in fiscal year 1996, up from 21% of sales in fiscal 1995 and 3% of
sales in fiscal year 1994. Net sales for this group increased to about
$14,800,000 in fiscal 1996, up from about $2,100,000 in fiscal 1995 and $190,000
in fiscal 1994. See "Sales By Product Category." The Geopaper product line is
expected to continue to grow as a percentage of sales as more customers accept
the product line and as the use of personal computers continues to grow world
wide, but there can be no assurances that such growth shall occur as expected by
the Company. See "Management's Discussion and Analysis and Plan of Operations"
and "Business Concentration".

The lettering and signage group manufacturers and distributes rub-on and
stick-on lettering, stencils, electronic moving message signs, American
Disabilities Act signs in Braille, and other signage products. This product
group represented 35% of sales in fiscal 1996, down from 79% and 97% of sales
during fiscal 1995 and 1994, respectively. The Company expects this product
group to continue to decrease as a percentage of sales as Geopaper product
growth is expected to be significantly faster than the sales growth of this
category. Sales of lettering and signage products as an industry will continue
to decline over time as the use of personal computers increases. The Company
anticipates that it can offset this expected decline by increasing its market
share of this industry through its recent addition of 400 to 500 Wal-Mart stores
as customers in fiscal 1996. The growth of existing customers featuring Geopaper
and lettering products, such as Office Depot, OfficeMax and Business Depot
(Staples, Inc.'s Canadian division), together adding over 200 new stores a year,
should also contribute to an increase in market share and add additional
lettering and signage sales each year. There can be no assurances, however, that
such increase in market share shall occur.

<PAGE>

SALES BY PRODUCT CATEGORY

The percentage of the Company's total sales attributable to each class of
product offered by the Company for the last three years is set forth below.

AS A PERCENTAGE OF SALES
------------------------

FISCAL YEAR
CLASS OF PRODUCT 1996 1995 1994
---------------- ---- ---- ----
Designer stationeries and specialty papers 65% 21% 3%
Lettering, signage, stencil and graphic art products 35% 79% 97%

STATED IN SALES DOLLARS (ROUNDED)
---------------------------------

FISCAL YEAR
CLASS OF PRODUCT 1996 1995 1994
---------------- ---- ---- ----
<S> <C> <C> <C>
Designer stationeries and specialty papers $14,800,000 $2,100,000 $200,000
Lettering, signage, stencil and graphic art products $7,800,000 $8,100,000 $6,700,000

</TABLE>

BUSINESS CONCENTRATIONS

Historically , Geographics, Inc. has sold a substantial portion of its
products to a limited number of customers. Concentration of sales to the five
largest customers is detailed below:

FISCAL YEAR
CUSTOMER 1996 1995 1994
-------- ---- ---- ----
Office Depot Inc.(1) 40% 31% 29%
OfficeMax, Inc. 24% 16% 16%
Martin Distribution, Inc.(2) 13% 12% 8%
United Stationers Inc. 3% 6% 6%
Wal-Mart Stores, Inc. 3% 1% 0%
---- ---- ----
83% 66% 59%
---- ---- ----
---- ---- ----

(1) Office Depot, Inc., the Company's largest customer, has announced
intentions to merge with Staples, Inc. The Company currently sells to Staples of
Canada (Business Depot) through its Canadian subsidiary, Geographics Marketing
Canada, Inc., however Staples is not a customer of the Company's domestic
operations. Management cannot estimate what impact, if any, this merger may have
on the future sales and operating results of the Company.

(2) Martin Distribution, the Company's distributor for Canada, is a related
party to the Company as the result of a common director. Martin Distribution was
replaced by Geographics (Marketing) Canada Inc., effective April 1, 1996, as
distributor of Geographics, Inc. products and will cease to be a customer of the
Company. Management estimates that this change will have little or no impact on
the future sales of the Company.

The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of these few customers. Although the composition of the group comprising the
Company's largest customers may vary from period to period, the loss of a
significant customer or any reduction in orders by any significant customer,
including reductions due to market, economic or competitive conditions in the
designer stationery or specialty papers industry, may have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company's ability to increase its sales in the future will depend in part
upon its ability to obtain orders from customers as well as the financial
condition and success of its customers and the general economy, of which there
can be no assurance.

<PAGE>

GROWTH STRATEGY

Management is of the opinion that the North American market will continue
to provide the Company with significant opportunities for growth. An overview of
North American growth opportunities are follows:

- - Designer stationeries and value added papers are still in their infancy.
Thousands of stores have yet to begin carrying these papers. The majority of
mass merchandise chains, computer retailers and department stores do not
carry designer stationery or value added paper. The office product superstore
chains and office product catalogs are the primary concentrations of
companies carrying these products.

- - The Company continues to diversify away from lettering and signage products.
New product introductions in 1997 will include educational and motivational
products that will be sold into existing markets and provide opportunities to
introduce Geographics products into new markets.

- - Existing Geopaper product lines are continually reviewed for performance and
may be replaced with new and improved lines. In addition to replacement and
improvement of existing lines, new Geopaper products are continually in
development and in test markets.

- - The Company may from time to time acquire art or paper products that
compliment the Geopaper line.

The Company believes that foreign markets may provide additional growth
opportunities. During July 1995, the Company established Geographics Marketing
Canada Inc. as a British Columbia corporation, in July 1995, to facilitate
marketing and distribution of Company products in Canada. Geographics (Europe)
Limited was incorporated in December 1995 as a U.K. corporation, to initiate
marketing and distribution of Company products in Europe. The Company also
distributes its products through an exclusive distributor in Australia, which
the Company has agreed to acquire as of July 1, 1996. The Company anticipates
further expansion internationally, including Asia, which is a prominent target
destination for Company products.

SALES/ASSETS BY GEOGRAPHIC LOCATION

Financial information relating to foreign and domestic operations and
export sales (all foreign sales are export sales) is as follows:

FISCAL YEAR
1996 1995 1994
---- ---- ----

Sales to Domestic and
Foreign Customers

United States $19,477,370 $ 8,755,853 $ 6,299,444
Canada (1) 2,854,935 1,271,898 530,462
Australia 281,330 158,385 70,969
----------- ----------- ------------
Total $22,613,635 $10,186,136 $ 6,900,875
----------- ----------- ------------
----------- ----------- ------------

Operating profit or (loss):

United States $ 2,081,817 $ 680,806 $ (939,290)
Canada (1) 377,328 98,831 (95,434)
Australia 65,316 12,307 (12,768)
----------- ----------- ------------
Total $ 2,524,461 $ 791,944 $(1,047,492)
----------- ----------- ------------
----------- ----------- ------------

Identifiable assets:

United States $24,263,181 $10,705,943 $ 6,628,915
Europe 410,060 0 0
Canada (2) 64,800 (91,270) 159,152
Australia 0 0 0
----------- ----------- ------------

<PAGE>

Total $24,738,041 $10,614,673 $ 6,788,067
----------- ----------- ------------
----------- ----------- ------------

(1) All export sales to Canada were to Martin Distribution, a related party.

(2) In fiscal 1995, Geographics borrowings from its Canadian owned partnerships
exceeded investments and other assets held in the partnerships, resulting
in a net liability in Canada.

International sales accounted for approximately 14%, 11% and 9% of total
net sales in 1996, 1995 and 1994, respectively. International sales were
concentrated in Canada and Australia and to a lessor degree Mexico, Israel and
Norway. The Company anticipates that international sales will increase as a
percentage of total sales resulting from the Company's expansion plans in Europe
and Asia. As a result, a significant portion of the Company's sales will be
subject to certain risks, including unexpected changes in regulatory
requirements, exchange rates, tariffs and other barriers, political and economic
instability, difficulties in receivable collections, natural disasters,
difficulties in staffing and managing foreign subsidiary and branch operations
and potentially adverse tax consequences. The Company is also subject to the
risk associated with the imposition of legislation and regulations relating to
the import or export of stationeries, specialty papers and office supply
products. The Company cannot predict whether quotas, duties, taxes or other
charges or restrictions will be implemented by the United States, Canada,
Australia or any other country upon the importation or exportation of the
Company's products in the future. There can be no assurance that any of these
factors or adoption of restrictive policies will not have a material adverse
effect on the Company's business, financial condition and results of operations.

PURCHASING

The Company purchases goods from approximately 700 vendors. One vendor,
Unisource, accounted for 56% of the Company's total merchandise purchases during
the year ended March 31, 1996. The Company purchases commodity paper and other
related products from this broker/vendor that could be supplied by other
sources. There can be no assurances that the relationship between the Company
and this vendor will continue and the loss of the purchasing power the Company
has established with this company would likely have a material adverse effect on
the Company. The Company does not consider itself dependent on any single source
for materials to manufacture its products.

MANAGEMENT INFORMATION SYSTEMS

The Company is investing significant resources to install integrated
software Systems that provides daily information on sales, gross margins and
inventory levels by warehouse and by stockkeeping unit. These systems will allow
the Company to compare current performance against historical performance and
the current year's budget. The systems have been designed to integrate all major
aspects of the Company's business including sales, electronic data interchange
(EDI), warehousing, manufacturing, distribution, purchasing, inventory control,
merchandise planning and replenishment, as well as various financial systems.
The Company is working with outside consultants in the design, installation and
ongoing refinement of this system. The current systems used by the Company are
primarily financial in nature, such as invoicing, accounting, general ledger and
shipping. Manufacturing and Inventory management systems are not presently
integrated. The new system will be installed by module beginning in the summer
of 1996 and is scheduled to be completed in the winter of fiscal 1997.

The Company currently utilizes EDI to transact business with its largest
customers. Presently 70% to 80% of customer orders are received by EDI. EDI is
utilized as it is a highly efficient method of transmitting large numbers of
orders in a paperless medium. The Company believes that the systems it has
developed and are presently developing, have the ability to continue to improve
customer service, operational efficiency, and management's ability to monitor
critical performance factors. The systems have been designed to support the
growth and expansion of the Company for the foreseeable future.

COMPETITION

The Company operates in a highly competitive environment. Competition can
be separated into two areas in which the Company conducts business; designer
stationery and lettering and signage. The Company's designer stationery
operations competes in most of its markets with Paper Direct, Inc., Taylor,
Inc., Z-International, Inc.,

<PAGE>

and REDIFORM, Inc. (a division Moore Corp Ltd). The Company designer stationery
products compete with competitor products for space in the office products
superstores, office product stores, mass market stores, contract

<PAGE>

stationers, wholesalers, office product catalogs and paper direct mail catalogs.
The Company's estimated competitive position (based upon information provided by
the Company's marketing and sales personnel) in the designer stationery industry
is as follows:

COMPANY COMPETITIVE POSITION IN THE MARKET
- ------- ----------------------------------

Paper Direct, Inc. 40%
Taylor, Inc 18%
Geographics, Inc. 10%
Z-International, Inc. 10%
REDIFORM, Inc. 5%
Others 17%
----

Total 100%
----

The Company's traditional lettering and signage operations compete with
several companies that produce similar products (i.e. vinyl lettering, stencil,
rub-on lettering), these competitors are: Visu-com, Chartpak and Duro-Art Ind.
Competition with Company products compete with competitor products for space in
the office products superstores, office product stores, mass market stores,
contract stationers, wholesalers, and office product catalogs. The Company's
estimated competitive position (based upon information provided by the Company's
sales and marketing personnel) in the lettering and signage industry is as
follows:

COMPANY COMPETITIVE POSITION IN THE MARKET
- ------- ----------------------------------

Geographics, Inc. 55%
Visu-Com, Inc. 23%
Chartpak, Inc. 11%
Duro Art Ind., Inc. 11%
----

Total 100%
----
Certain of these competitors are larger, better capitalized, more
established and have greater access to resources necessary to produce a
competitive advantage. The Company believes that its product designs, product
quality, merchandising programs, distribution channels, customer service and
competitive pricing distinguishes the Company from its competitors.

The development and manufacture of new designer stationeries and specialty
papers are highly capital intensive. In order to remain competitive, the Company
must continue to make significant expenditures for capital equipment, sales,
service, training and support capabilities, investments in systems, procedures
and controls, expansions of operations and research and development, among many
items. The Company expects that anticipated cash flows from operations,
proceeds received from the May 1, 1996 private placement, capital leases, and
funds available under a line of credit will be sufficient to meet the Company's
capital requirements for the next twelve months. To the extent that such
financial resources are insufficient to the fund the Company's activities,
additional financing might be required. There can be no assurance that
additional financing will be available on reasonable terms.

TRADEMARKS AND COPYRIGHTS

The Company has seven (7) federally registered trademarks; (1) GEOPAPER,
(2) GEOTYPE, (3) GEOTAPE, (4) GEOSTENCIL, (5) SHIELD `N' SEE, (6) GEOFOIL, and
(7) GEOSIGN. The Company has 6 (six) applications pending with the U.S. Patent
and Trademark Office for federal trademark registration for Geographics product
lines. Additionally the Company has filed 6 (six) trademark applications pending
in Canada and Australia for Geographic product lines in those countries, which
applications are currently pending.

The Company has two (2) registered U.S. copyrights for the following
products, "GeoCrumpled" and "GEOCLOUDS".

<PAGE>

Certain of the Company's proprietary manufacturing processes are protected
by trade secrets. While the Company has made every effort to protect all of its
intellectual property, to the extent such protections are inadequate, the
Company could lose a part or all of these rights which, in turn, could have a
material adverse effect on the Company.

FUTURE ACQUISITIONS

The Company may, in the future, pursue acquisitions of complementary
product lines, technologies or businesses. Future acquisitions by the Company
may result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses related
to goodwill and other intangible assets, which could materially adversely affect
Company profitability. In addition, acquisitions involve numerous risks,
including difficulties in the assimilation of the operations, technologies and
products of the acquired companies, the diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
limited direct prior experience, and the potential loss of key employees of the
acquired company. In the event that such acquisitions do occur, there can be no
assurance as to the effect thereof on the Company's business or operating
results.

EMPLOYEES

As of November 8, 1996, the Company had 244 employees of whom 234 were
employed at its Corporate headquarters in Blaine, Washington, 5 of whom were
employed at the Company's facilities in the United Kingdom, and 5 of whom were
employed at the Company's facilities in Australia. The manufacturing,
warehousing and product distribution aspects of the business employs 192
employees, 36 employees work in administration and 16 employees work in various
managerial positions. None of the Company's employees are subject to a
collective bargaining agreement. Management believes that its relationship with
its employees is good.

INFLATION

Inflation has not had a significant impact on the Company's operations.
However, any significant change in the price for paper or labor and
environmental compliance costs could adversely impact the Company.

QUARTERLY FLUCTUATIONS

The Company's operating results may fluctuate significantly from period to
period as a result of a variety of factors, including product returns,
purchasing patterns of consumers, the length of the Company's sales cycle to key
customers and distributors, the timing of the introduction of new products and
product enhancements by the Company and its competitors, technological factors,
variations in sales by product and distribution channel, and competitive
pricing. Consequently, the Company's product revenues may vary significantly by
quarter and the Company's operating results may experience significant
fluctuations.

SEASONALITY

A significant portion of the Company's customer orders are placed between
August and October of each year in anticipation for shipment during the
Company's third fiscal quarter, which includes the Christmas season. As a
result, the Company has experienced, and is expected to continue to experience,
such seasonal fluctuations in its operating results based upon past purchasing
patterns.

<PAGE>

ITEM 2. DESCRIPTION OF PROPERTIES

The Company considers its properties to be suitable and adequate for their
intended uses. These properties consist of the following:

EXECUTIVE OFFICES AND DOMESTIC FACILITIES

The Corporate office and manufacturing facility in Blaine, Washington has
approximately 96,500 square feet of office, warehouse and manufacturing space.
This facility was increased from 34,000 sq. ft to 49,000 sq. ft in December
1994. The facility was increased to its current size during fiscal year 1996,
completing construction in late March 1996. Construction was financed by
progress payments advanced from term bank loans described below. No construction
in progress loan balances were outstanding at March 31, 1996.

The Blaine facility is built on ten and one half acres of Company-owned
land, purchased for $114,563 in 1980. The buildings and real estate are
collateral for four bank real estate loans totaling $2,341,057. These loans have
interest rates ranging from 8.825% to 10% and maturities ranging from June 2004
to October 2010. The current portion of long-term bank debt associated with real
estate as of March 31, 1996 is $175,643. See "Management's Discussion And
Analysis Of Financial Condition And Results Of Operations."

OTHER WHATCOM COUNTY FACILITIES

The Company leased a 19,050 sq. ft. facility in Bellingham, Washington in
October 1995. This facility is used in manufacturing, staging and shipping
functions. The lease payments are $7,620 per month, triple net, the lease
expires in October 1998, and the Company has an option to renew for another
three year term. In February 1996, the Company also leased a 10,000 sq. ft.
facility near Ferndale, Washington on a six month lease of $3,950 per month
triple net. This facility was used to meet material staging and warehouse
requirements while the new Blaine facilities were being completed and organized.

EUROPEAN FACILITIES

Geographics (Europe) Limited leases 6,700 square feet of warehouse space
near London, England. The lease requires quarterly lease payments of
approximately $5,202, triple net, expiring on February 14, 2006.

AUSTRALIAN FACILITIES

Upon the completion of the Graham's Graphics acquisition, the Company will
assume the lease of 5,000 square feet of warehouse space near Brisbane,
Australia.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in legal proceedings arising in the ordinary course
of business. The Company is not involved in any legal proceedings that it
believes will result, individually or in the aggregate, in a material adverse
effect upon its financial condition or results of operations.

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

No matters were submitted to a vote of security holders during the fourth
quarter ended March 31, 1996.

<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

PRICE RANGE OF COMMON STOCK

The Company's Common Stock began trading on the NASDAQ National Market
under the symbol "GGIT" on March 8, 1996. From May 5, 1995 to March 7, 1996 the
Company's Common Stock traded on the OTC Bulletin Board. The Company's Common
Stock also trades on the Toronto Stock Exchange under the symbol "GGI".

The following table sets forth for the periods indicated the high and low
sale prices per share of the Common Stock on the NASDAQ National Market
System/OTC Bulletin Board and Toronto Stock Exchange, as reported by NASDAQ and
the Toronto Stock Exchange.

NASDAQ NMS/OTC BULLETIN BOARD TORONTO STOCK EXCHANGE
SYMBOL -GGIT SYMBOL - GGI
US$ CDN. $

1994 HIGH LOW HIGH LOW

First Quarter - - $1.85 $0.90
Second Quarter - - $1.75 $1.00
Third Quarter - - $1.25 $1.00
Fourth Quarter - - $1.35 $1.05

1995 HIGH LOW HIGH LOW

First Quarter - - $1.70 $1.05
Second Quarter - - $1.20 $0.90
Third Quarter - - $1.05 $0.80
Fourth Quarter - - $1.95 $0.80

1996 HIGH LOW HIGH LOW

First Quarter $1.88 $1.13 $2.25 $1.74
Second Quarter $3.44 $1.45 $4.60 $2.00
Third Quarter $5.38 $3.00 $7.10 $4.00
Fourth Quarter(1) $6.25 $4.50 $8.75 $6.10

1997 HIGH LOW HIGH LOW

First Quarter $6.94 $4.75 $9.39 $6.88
Second Quarter $5.69 $3.00 $7.30 $4.25
Third Quarter(2) $3.40 $2.88 $4.75 $3.75

(1) The Company's shares began trading on the NASDAQ National Market System
effective March 8, 1996.

(2) Third Quarter 1997 activity from October 1, 1996 to November 15, 1996.

As of November 15, 1996, there were 275 holders of record of the Common
Stock of Geographics, Inc. The closing bid price on the NASDAQ National Markets
System at November 15, 1996 was $2.94.

<PAGE>

The Company currently intends to retain all earnings for working capital to
support growth, to reduce outstanding indebtedness and for general corporate
purposes. The Company, therefore, does not anticipate paying any dividends in
the foreseeable future. The Company did not pay dividends during the three years
ended March 31, 1996.

VOLATILITY OF STOCK PRICE

The Company believes that factors such as announcements of developments
related to the Company's business, fluctuations in the Company's operating
results, sales of securities of the Company into the marketplace, general
conditions in the designer stationery and specialty paper industry, paper prices
or the worldwide economy, an outbreak of hostilities, a shortfall in revenue or
earnings from or changes in analysts' expectations, announcements of
technological innovations or new products or enhancements by the Company or its
competitors, developments in the Company's relationships with its customers,
suppliers and employees could cause the price of the Company's Common Stock to
fluctuate, perhaps substantially. In addition, in recent years the stock market
in general, and the market for shares of small capitalization stocks in
particular, including the Company's, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. Many companies, including the Company, have recently
experienced historical highs in the market price of their common stock. There
can be no assurance that the market price of the Company's Common Stock will not
continue to experience significant fluctuations in the future, including
fluctuations that are unrelated to the Company's performance.

<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The financial data included in the following table has been selected by the
Company and has been derived from the consolidated financial statements for the
period indicated. The following financial data should be read in conjunction
with the Company's Consolidated Financial Statements and related Notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein.

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

FISCAL YEAR ENDED MARCH 31,
<TABLE>
<CAPTION>
(1) (2)(3)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenues $22,613,635 $10,186,136 $6,900,875 $5,373,595 $3,880,228
Net income (loss)
attributable to Common
Stock 1,232,024 747,742 (1,241,518) 269,089 (180,944)
Net income (loss) per
average common share
outstanding .19 .16 (.28) .06 (.06)
Weighted average shares
outstanding 6,606,499 4,549,101 4,424,535 4,231,729 3,231,729

BALANCE SHEET DATA:

FISCAL YEAR ENDED MARCH 31,
(1) (2)(3)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

Working capital $5,831,031 $1,836,436 $869,651 $1,998,656 $770,698
Total assets 24,738,041 10,614,673 6,788,067 5,358,937 5,336,137
Long term debt 3,690,360 3,519,948 3,083,818 2,070,572 1,510,770
Stockholders' equity 9,989,852 2,803,341 1,471,514 2,518,695 1,747,712
</TABLE>

(1) As restated - The financial statements for the fiscal year ended March 31,
1993 have been restated to reflect adjustments to the carrying value of
product display racks, inventory and investments in partnerships.

(2) As adjusted - Although the financial statements for the fiscal year ended
March 31, 1992 have not been restated or reissued to reflect adjustments to
the carrying value of product display racks, inventory and investments in
partnerships, the selected financial data presented herein for 1992 has
been adjusted to retroactively reflect the impact of these changes which
were effective in fiscal year 1994.

(3) As restated - The financial statements for the fiscal year ended March 31,
1992 were previously restated to reflect a reorganization, to apply changes
in methods of accounting and to correct certain errors.

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the Notes thereto appearing
elsewhere on this Report.

GENERAL

Geographics, Inc. was incorporated in 1974 and has primarily been a
manufacturer of stick-on letters, rub-on letters, stencils and other signage
products. The Company has significantly increased the scope of its operations
with the development of "Geopaper" in 1992. Geopaper is a designer stationery or
image paper with art or photo images printed on the paper. The Company began
retooling and expanding facilities to facilitate the manufacture, warehouse and
distribution of Geopaper products.

Geopaper sales represented 65% of total sales in 1996, 21% of total sales
in 1995 and 3% of total sales in 1994. Besides increasing as a percentage of
sales, Geopaper sales were also responsible for significant increases in total
Company sales. During 1996, Company sales increased 122% to $22,613,635 from
$10,186,136 in 1995. During 1995, Company sales increased 48% to $10,186,136
from $6,900,875 in 1994.

RESULTS OF OPERATIONS

The following table sets forth the percentages which the items in the
Company's consolidated statements of income bear to net sales for the periods
indicated:
FISCAL YEAR
1996 1995 1994

STATEMENTS OF OPERATIONS DATA:
Net sales 100.0% 100.0% 100.0%
Cost of sales 62.8 57.7 63.2
----- ----- -----
Gross margin 37.2 42.3 36.8

Selling, general and administrative
expenses 25.4 28.2 45.1
Amortization of goodwill .7 6.3 6.9
----- ----- -----
Income from operations 11.1 7.8 (15.2)
----- ----- -----

Other income .6 .0 2.9
Interest expense (3.5) (4.5) (5.2)
----- ----- -----
Other income (expense) (2.9) (4.5) (2.3)
----- ----- -----

Income before provision for income
taxes 8.2 3.3 (17.5)

Income tax provision (benefit) 2.8 (4.0) .5
----- ----- -----

Net income 5.4% 7.3% (18.0)%
----- ----- -----
----- ----- -----

FISCAL YEARS ENDED MARCH 31, 1996 AND 1995

Net Sales. Net sales increased 122% to $22,613,635 in fiscal 1996 from
$10,186,136 in fiscal 1995. This increase was primarily attributable to the
acceptance of the Geopaper program. The Geopaper program experienced a sales
increase of 605% in fiscal 1996 to $14,800,000 compared to $2,100,000 for fiscal
1995. Geopaper sales increases were specifically due to shipments of Geopaper
products to all Office Depot Inc. and OfficeMax stores in North America, as well
as shipments of Geopaper products to 248 Wal-Mart stores in March 1996. Office
Depot, Inc., the Company's largest customer, has announced intentions to merge
with Staples, Inc. The Company currently sells to Staples of Canada (Business
Depot) through its Canadian subsidiary, Geographics Marketing Canada, Inc.,
however Staples is not a customer of the Company's domestic operations.
Management cannot estimate what impact, if any, this merger may have on the
future sales and operating results of the Company.

<PAGE>

Signage and lettering sales for fiscal 1996 decreased 4% to $7,800,000 from
$8,100,000 in fiscal 1995. The majority of the decline in signage and lettering
sales was due to the Company discontinuing the sale of science fair presentation
boards. In prior years, the Company has purchased presentation boards and
bundled them with Geographics stick-on lettering products. In fiscal 1996, the
Company continued to supply the lettering products, while the Company's
customers began purchasing the presentation boards directly from the
manufacturer. After adjusting sales for presentation boards, fiscal 1996
lettering and signage sales were slightly ahead of fiscal 1995 sales.

The sales mix of Geopaper products increased to 65% of sales in fiscal 1996
from 21% of sales in fiscal 1995, while lettering and signage sales decreased to
35% of sales from 79% of sales for the same periods. It is the opinion of
management that sales of signage and lettering products will remain flat or
possibly decline in the future as the computerization of homes and offices will
allow the efficient production of lettering and signage products by current
end-users. Conversely, the increasing number of computers will increase the
number of potential end users of Geopaper products that are specifically
designed for use with computer technology.

Gross Margin. Cost of sales includes product manufacturing costs, occupancy
and delivery costs. Gross profit as a percentage of sales decreased to 37.2% in
fiscal 1996, from 42.3% in fiscal 1995. The decrease in the gross margin is the
result of primarily two factors. The first factor results from a change in sales
mix to products with lower gross margins. Geopaper represented 65% of sales
while lettering and signage represented 35% of sales in 1996, compared to 21%
and 79% of sales in 1995, respectively. Gross margins for Geopaper were
approximately 31% while gross margins for lettering and signage were
approximately 49% during fiscal 1996. The second factor results from
manufacturing and labor inefficiencies created by the Company's 122% growth
rate. This rapid growth forced the Company to substantially increase its
facilities, equipment and work force, as well as utilize leased warehouse space
in order to meet the increased sales demands. A more controlled growth pattern
would have allowed the Company to more effectively manage the installation and
usage of new equipment introduced to the production process, as well as phase in
the expanded warehouse space without utilizing off-site facilities.

Other factors affecting the gross margin include:

(a) Raw Material cost increases/decreases. During fiscal 1996, the cost of the
Company's raw materials for Geopaper (commodity large sheet plain paper) was
extremely volatile in price. The raw material price changes during the year
resulted in higher overall raw paper costs and higher production costs. The
effect of the paper price increases on finished goods is somewhat limited as
packaging and labor costs constitute the largest portions of finished Geopaper
products.

(b) Selling price increases/decreases. During fiscal year 1996 the Company was
able to pass the higher costs of raw paper on to its customers in the form of
increased selling prices. Management cannot provide assurance that increases can
be passed on in the future, nor can management provide assurances that decreases
in raw materials will result in decreased selling prices.

(c) Expansion strategies. Expansion into Europe and other markets will result
in opportunities and risks that will affect gross margins. Each market has
differing competition, pricing levels and raw material costs. The Company
intends to produce most of its products at its Blaine, Washington facility and
may be at an advantage or disadvantage in various markets as a result. The
Company strategy of exporting product to foreign markets demonstrates it's
belief that it is more cost efficient to ship product than to manage separate
manufacturing facilities in multiple countries.

(d) Selling strategies. The Company's approach to competition, pricing
strategies, product marketing, changes in packaging, and changes in product
design may all have effects on the selling price and cost to produce the
Company's products, all of which affect the gross margin. Management cannot
provide assurances that decisions made by management related to the above items
will result in favorable changes in gross margin.

(e) Facilities and equipment. During 1996, the Company noted logistical
inefficiencies related to the layout of the Blaine Facility. Management
anticipates the March 1996 completion of the Blaine facilities expansion should
reduce or eliminate a number of logistical cost variances. The expanded Facility
allows the Company to eliminate many of the off-site storage warehouses that
were required to manage the increased levels of inventory during

<PAGE>

1996. The Company will be able to reduce handling and storage costs, while
improving logistics, during fiscal 1997 as inventory becomes centralized at the
Company's Blaine Facility. The addition of more efficient printing and enhanced
packaging equipment during fiscal 1996 and 1997 should also result in positive
margin improvements as superior production lines are completed.

Amortization of goodwill. Goodwill amortization declined to 0.7% of sales
from 6.3% of sales for fiscal years 1996 and 1995 respectively. The decline was
due in part to sales volumes, however, the decrease was largely due to the
completion of the amortization of the goodwill related to the 1993 purchase of
the lettering division of E-Z Industries. Fiscal 1996 included three months of
amortization compared to twelve months of amortization during fiscal 1995.

Income from operations. Income from operations increased to 11.1% of sales
during fiscal 1996, an increase from 7.8% of sales in fiscal year 1995. The
improvement in income from operations was due to the reductions in SG&A and
goodwill amortization expenses as a percentage of sales, which more than offset
the decreased gross margin percentage.

Other income. Other income was 0.6% of sales in fiscal 1996, compared to
0.0% of sales during fiscal 1995. This category includes items such as
management fees, foreign exchange gains, gains on disposition of fixed assets,
and other miscellaneous items. Management does not anticipate a reoccurrence of
this income in fiscal 1997.

Interest expense. Interest expense increased significantly to $787,848
during fiscal year 1996, compared to $457,499 for fiscal 1995. However, as a
percentage of sales, interest expense declined in fiscal 1996 to 3.5% of sales
compared to 4.5% for fiscal 1995. The acquisition of equipment used in the
manufacture of Geopaper, in addition to higher bank debt related to facilities
expansion and working capital requirements resulted in higher interest costs
during fiscal 1996. The higher interest costs spread over a significantly higher
sales volume in 1996 resulted in a decline in interest costs as a percentage of
sales.

Income before provision for income taxes. Income before provision for
income taxes improved to 8.2% of sales in fiscal 1996 compared to 3.3% of sales
in fiscal 1995. The improvement was due to the higher profitability in income
from operations noted above and the lower interest costs as a percentage of
sales previously discussed. In general, income before provision for income taxes
improved due to economies of scale resulting from increased sales volumes.

Income tax provision (benefit). The income tax provision in fiscal year
1996 was 2.8% of sales, compared to a benefit of 4.0% of sales in fiscal 1995.
A tax benefit was recognized in fiscal 1995 as management determined that future
operating and taxable income will more likely than not be sufficient to fully
recognize all deferred tax assets existing at March 31, 1995. As a result, the
carrying value of the net deferred tax asset was increased and recognized as a
current (1995) period income tax benefit. This benefit was non-reoccurring in
nature and had no effect on fiscal 1996 results.

Net income. Net Income of $1,232,024 in fiscal 1996, or 5.4% of sales
compares to net income of $747,742 in fiscal 1995, or 7.3% of sales. Net income
as a percentage of sales declined primarily due to the non-reoccurring tax
benefit discussed previously in fiscal 1995.

FISCAL YEARS ENDED MARCH 31, 1995 AND 1994

Net Sales. Net sales increased 48% to $10,186,136 in fiscal 1995 from
$6,900,875 in fiscal 1994. This increase was primarily attributable to the
acceptance of the Geopaper program. The Geopaper program experienced a sales
increase of 1,109% in fiscal 1995 to $2,100,000 from $190,000 for fiscal 1994.
This sales growth results directly from the growth of the office supply
superstore industry, a major focus of the Company's marketing efforts.

<PAGE>

Fast growing companies such as Office Depot, Office Max and Business Depot,
which are among the fastest growing Companies in this industry, all carry the
Company's products. The sales mix of Geopaper products increased to 21% of sales
in fiscal 1995 from 3% of sales in fiscal 1994, while lettering and signage
sales decreased to 79% of sales from 97% of sales for the same periods.

Gross Margin. Cost of sales includes product manufacturing costs,
occupancy and delivery costs. Gross profit as a percentage of sales increased to
42.3% in fiscal 1995 from 36.8% in fiscal 1994. The increase in the gross margin
is the result of primarily two factors; (1) The Company wrote down many
slow-moving or obsolete products during fiscal 1994 as the Company prepared for
the launch of it's Geopaper product line and, (2) Manufacturing and labor
efficiencies gained from new production and packaging equipment employed during
fiscal 1995. This increase in margins was accomplished despite the market
pressures experienced when selling to discount office supply superstores which
demand the best possible prices. Geopaper has proven to be a successful product
for these stores, thus allowing the Company to maintain improved profit margins.

Selling, general and administrative expenses. Selling, general and
administrative expenses (SG&A) are those central expenses that are incurred to
support the Company's selling, marketing and manufacturing efforts. SG&A
expenses declined as a percentage of sales to 28.2% of sales in fiscal 1995 from
45.1% of sales in fiscal 1994. The decline is primarily due to the spreading of
SG&A expenses over significantly higher sales volumes resulting from the success
of the Geopaper programs, in addition to the effect of several cost-cutting
measures implemented by the Company during fiscal 1995. The decrease was also
attributable to various one-time costs of acquiring and integrating the EZ
Letter Division into the Companies continuing operations during fiscal 1994.

Amortization of goodwill. Goodwill amortization declined to 6.3% of sales
from 6.9% of sales for fiscal years 1995 and 1994, respectively. The decline was
primarily due to increased sales volumes. Fiscal 1995 included twelve months of
amortization compared to nine months of amortization during fiscal 1994.

Other income. Other income was 0.0% of sales in fiscal 1995, compared to
2.9% of sales during fiscal 1994. This category includes items such as
management fees, foreign exchange gains, gains on disposition of fixed assets,
and other miscellaneous items. Management does not anticipate a reoccurrence of
this income in the future.

Interest expense. Interest expense increased significantly to $457,499
during fiscal year 1995, compared to $356,060 for fiscal 1994. However, as a
percentage of sales, interest expense declined in fiscal 1995 to 4.5% of sales
compared to 5.2% for fiscal 1994. The acquisition of equipment used in the
manufacture of Geopaper, in addition to higher bank debt related to facilities
expansion and working capital requirements resulted in higher interest costs
during fiscal 1995. The higher interest costs spread over a significantly higher
sales volume in 1995 resulted in a decline in interest costs as a percentage of
sales.

Income tax provision (benefit). The income tax benefit in fiscal year 1995
was 4.0% of sales, compared to a provision of 0.5% of sales in fiscal 1994. The
tax benefit was recognized in fiscal 1995 as management determined that future
operating and taxable income would more likely than not be sufficient to fully
recognize all deferred tax assets existing at March 31, 1995. As a result, the
carrying value of the net deferred tax asset was increased and recognized as an
income tax benefit during fiscal 1995. This benefit was non-reoccurring in
nature and had no effect on fiscal 1996 results.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations in general, and its Geopaper manufacturing
operations in particular, are typically capital intensive. The Company has
experienced from time to time significant negative cash flows from operating
activities which have been offset by equity and debt financings. As the Company
expands its production and distribution activities, it expects to experience
negative cash flows from operating activities from time to time. In such
circumstances, the Company will be required to fund at least a portion of
production and distribution costs, pending receipt of anticipated future
revenues, from working capital or from additional debt or equity financings from
outside sources.

Although the Company has the ability to finance its planned growth and
expansion from operating cash flow, capital lease financing, and borrowings
under the Company's existing credit facilities, the Company also considers
alternative financing options, such as the issuance of common stock or
convertible debt, in the event

<PAGE>

market conditions make such alternatives financially attractive. The Company's
future financing requirements will be affected by the number of new customers,
the strength of reorders by existing customers, the growth of existing
customers, as well as the success of new products introduced by the Company.
Additional financing might also be necessary in the event the Company pursues
further expansion or business acquisition opportunities. There is no assurance
the Company will be able to obtain such financing or that such financing, if
available, will be on terms satisfactory to the Company.

The revolving credit agreement, installment notes and capital lease
obligations are collateralized by substantially all of the assets of the
Company. Additionally, the revolving credit agreement and certain other
financing arrangements require the Company to comply with several debt
covenants, the most restrictive of which include the maintenance of liquidity
and coverage ratios. The covenants include liquidity ratios which require the
Company to maintain established levels of current and net worth ratios, and
limits are established for cash flow coverage and capital expenditures. As of
March 31, 1996, the Company is in compliance with the debt covenants.

FISCAL YEARS ENDED MARCH 31, 1996 AND 1995

On July 14, 1995, the Company's Bank replaced the existing $5,000,000
revolving line of credit with an interest rate of prime plus .5%, with a
$6,000,000 revolving credit agreement with an interest rate of prime plus .5%.

On September 15, 1995, officers and directors converted debentures in an
aggregate face amount of $200,000 into 219,178 common shares.

On September 26, 1995, the Company issued $996,000 of convertible
debentures payable to officers and directors. The debentures were convertible at
the holders option into common shares of the Company at Cdn. $4.45 per share, to
a maximum 274,233 common shares. On December 22, 1995, these debentures were
converted into 273,233 common shares, and are no longer outstanding.

On October 23, 1995, the Company's Bank replaced the existing $6,000,000
revolving line of credit with an interest rate of prime plus .5%, with a
$7,000,000 revolving credit agreement with an interest rate of prime plus .25%.

Between June 1995 and November 1995, the remaining holders of the 8%
convertible subordinated debentures converted the remaining $990,000 of
outstanding debentures into 894,960 shares of common stock.

On December 7, 1995, the Company's Bank modified the interest rate on two
existing term real estate loans. The floating interest rate on two loans
totaling $862,607 was fixed at a rate 8.825% per annum. Two real estate loan
commitments totaling $605,000 with interest rates at prime plus 1.0% were also
converted to a fixed rate of 8.825% per annum.

On January 23, 1996, the Company completed a private placement of 500,000
common shares to officers and directors at a price of Cdn. $5.75. Total cash
received, net of issuance costs, totaled $1,906,100.

On February 13, 1996, the Company's Bank replaced the existing $7,000,000
revolving line of credit with an interest rate of prime plus .25%, with a
$12,000,000 revolving credit agreement with interest at the prime rate.

In addition to bank borrowing, debt conversions and equity placements, the
Company received $841,154 upon the exercise of stock options and warrants
exercised during the fiscal year, resulting in the issuance of 768,000 shares of
common stock.

At March 31, 1996 certain officers and directors had advanced the Company
$1,264,711 in the form of uncollateralized notes payable. The notes are payable
on demand and are classified as current liabilities. Interest on these notes are
payable monthly at the rate of prime plus 1%.

During fiscal year 1996, the Company wound up and dissolved International
Geographics of Ontario ("IGO"). The purpose of IGO was to distribute the
Company's products in Canada. The dissolution of IGO has had a positive impact
upon the Company as marketing and distribution to IGO's former customers is
handled directly

<PAGE>

by its' subsidiary Geographics Marketing Canada, Inc. The financial impact
resulting from this dissolution was insignificant.

Subsequent to year end, the Company received $6,500,000 before expenses as
the result of a private placement of 1,268,293 units at a price of $5.125 per
unit. Each unit is composed of one share of stock and one warrant to purchase a
share of stock at $6.50 per share. The proceeds were used to pay down the
revolving credit line balances.

Subsequent to year end, the Company agreed to purchase substantially all of
the assets of Grahams Graphics Pty. Ltd., its exclusive distributor in
Australia. The total purchase price is expected to approximate US$390,000 to be
paid as follows: (i) the issuance of 50,000 shares of common stock (valued at an
aggregate of US$200,000); (ii) the issuance of options to purchase an additional
50,000 shares of common stock for US$4.00 per share; (iii) the assumption of
approximately US$150,000 in unsecured trade liabilities; and (iv) a one time
cash payment of US$40,000. Upon the completion of the purchase transaction, the
assets acquired and liabilities assumed will be contributed to the Company's
wholly-owned Australian subsidiary, Geographics Australia Pty. Ltd. The
effective date of this transaction will be July 1, 1996.

NET CASH FLOWS FROM OPERATING ACTIVITIES. The Company's principal cash
flow requirements have been to fund working capital needs, including building
inventory in the United States and the United Kingdom, as well as funding
equipment deposits and prepaid expenses. The Company's sales are substantially
on net sixty day terms, and trade receivables are used as collateral to provide
the Company with a source of capital prior to their collection. Working capital
requirements are reduced by the existence of vendor credit terms, which allow
the Company to finance a portion of its inventory.

The Company experienced negative operating cash flows during fiscal year
1996 and 1995 ($4,875,345 for fiscal 1996 and $379,162 for fiscal 1995).
Contributing to the negative cash flow from operations was the increase in trade
receivable and related party trade receivables balances. Total trade receivables
for fiscal 1996 increased 113% to $5,873,578 compared to $2,751,299 for fiscal
1995. The increase in receivables of 113% at year end fiscal 1996 over fiscal
1995 year end balances is consistent with the 122% increase in sales the Company
experienced during 1996.

Inventory increased to $9,139,273 at year end fiscal 1996 compared to
$2,901,155 for fiscal year end 1995, an increase of 215%. The 215% increase in
inventory is due in part to the following factors:

(a) Building of inventory in anticipation of higher sales levels in fiscal
1997 in keeping with management's philosophy that the building of inventory
is preferable and less expensive than losing customers due to product
shortages during growth periods.

(b) The Company built Geopaper inventory for distribution in the European
market, which requires a paper size which is slightly narrower and longer
than the North American standard. The result necessitated a duplication of
inventory stock for two paper sizes. In addition, Geographics (Europe)
Limited was building inventory levels at March 31, 1996 in preparation of
initial European orders beginning in April 1996.

(c) The Company has a continuing Geopaper design development program,
consequently new product designs are printed and stored in inventory
pending initial releases to customers.

Despite the Company's rapid growth, management anticipates improved
accounts receivable and inventory management due to recent managerial additions
focusing on these critical working capital areas. Improved accounts receivable
collection procedures and increased staffing are expected to minimize future
increases in accounts receivable. New information systems, new warehouse
facilities, improved inventory organization and the addition of key purchasing
and inventory staff should improve efficiencies in inventory management and
allow for additional sales growth without corresponding inventory increases.

NET CASH FLOWS FROM FINANCING ACTIVITIES. For the fiscal year ended March
31, 1996, the Company received a net $8,555,704 from various financing sources,
compared to $1,697,768 for the prior fiscal year. For the

<PAGE>

year ended March 31, 1996, the Company increased current line of credit
borrowings by $3,139,463, compared to $990,427 for the year ended March 31,
1995. Proceeds from long-term debt borrowings for fiscal year 1996, were
$1,003,029, compared to $765,125 in fiscal 1995. Repayments of long-term debt in
fiscal 1996 were $467,986 compared to $232,685 in fiscal 1995. The Company
received $2,452,573 from officers and directors in the form of notes during
fiscal 1996, while $22,746 was received from officers and directors in fiscal
year 1995. Repayments of notes payable to officers and directors were $398,629
in fiscal 1996 compared to $134,888 in fiscal 1995. In addition the Company
received proceeds from private placements, option exercises and warrant
exercises in the amount of $2,827,254 in fiscal 1996, compared to $287,043 in
fiscal year 1995. The proceeds received from the above debt and equity
financings were primarily utilized to finance working capital requirements,
building expansion and equipment acquisitions related to the success of the
Geopaper program.

NET CASH FLOWS FROM INVESTING ACTIVITIES. The Company experienced a net
negative cash flow from investing activities for fiscal 1996, of $3,645,679,
compared to a negative cash flow from investing activities of $1,303,258 for
fiscal 1995. The Company made significant investments to increase its Geopaper
production capacity by acquiring printing presses, paper cutting equipment,
packaging equipment, computers, trucks and warehouse racking. The Company
anticipates that it will continue to invest in Geopaper production equipment in
fiscal 1997. On January 23, 1996, the Company placed an order for a printing
press. The cost is approximately $1,200,000, which is expected to be delivered
during the second quarter of fiscal 1997. The Company has commitment from a
financial institution to provide capital lease financing for this equipment.

FISCAL YEARS ENDED MARCH 31, 1995 AND 1994

NET CASH FLOWS FROM OPERATING ACTIVITIES. The Company experienced negative
operating cash flows during fiscal year 1995 and 1994 ($379,162 for fiscal 1995
and $275,137 for fiscal 1994). Contributing to the negative cash flow from
operations was the increase in trade receivables and related party trade
receivables balances. Total trade receivables for fiscal 1995 increased 192% to
$2,751,299 compared to $940,501 for fiscal 1994. The increase in receivables of
192% at year end fiscal 1995 over fiscal 1994 year end balances is consistent
with the rapid sales growth the Company enjoyed during fiscal 1995. Also
contributing to the increase in receivables was a large sales increase in fourth
quarter sales to office supply superstores which require relatively longer
credit terms.

The Company also expended significant amounts of working capital to
increase their inventories which increased to $2,901,155 at March 31, 1995 from
$1,841,481, an increase of 58%. The 58% increase in inventory was due in part to
the following factors: (1) Building of inventory in anticipation of higher sales
levels in fiscal 1996 in keeping with management's philosophy that the building
of inventory is preferable and less expensive than losing customers due to
product shortages during growth periods, and (2) The Company has a continuing
Geopaper design development program, consequently new product designs are
printed and stored in inventory pending initial releases to customers.

NET CASH FLOWS FROM FINANCING ACTIVITIES. For the fiscal year ended March
31, 1995, the Company received a net $1,697,768 from various financing sources,
compared to $2,339,358 for the prior fiscal year. For the year ended March 31,
1995, the Company increased current line of credit borrowings by $990,427,
compared to $968,835 for the year ended March 31, 1994. Proceeds from long-term
debt borrowings for fiscal 1995, were $765,125, compared to $1,351,924 in fiscal
1994. Repayments of long-term debt in fiscal 1995 were $232,685 compared to
$214,904 in fiscal 1994. The Company received $22,746 from officers and
directors in the form of notes during fiscal 1995, while $49,184 was received
from officers and directors in fiscal year 1994. Repayments of notes payable to
officers and directors were $134,888 in fiscal 1995 compared to $10,018 in
fiscal 1994. In addition the Company received proceeds from private placements,
option exercises and warrant exercises in the amount of $287,043 in fiscal 1995,
compared to $194,337 in fiscal year 1994. The proceeds received from the above
debt and equity financing were primarily utilized to finance working capital
requirements, building expansion and equipment acquisitions related to the
success of the Geopaper program.

NET CASH FLOWS FROM INVESTING ACTIVITIES. The Company experienced a net
negative cash flow from investing activities for fiscal 1995, of $1,303,258,
compared to a negative cash flow from investing activities of $2,096,849 for
fiscal 1994. The Company made significant investments to increase its Geopaper
production capacity by acquiring printing presses, paper cutting equipment,
packaging equipment, computers, trucks and

<PAGE>

warehouse racking. In addition, the Company expended $1,500,000 on the purchase
of the EZ Letter Division of EZ Industries during fiscal 1994. The Company also
borrowed $250,422 and $34,376 from related partnerships during the fiscal years
ended March 31, 1995 and 1994, respectively.

ITEM 8. FINANCIAL STATEMENTS

The financial statements and supplementary data are included under Item 14
(a) 1. and (a) 2. of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages and positions with the
Company of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of stockholders and serve for one
year or until their successors are elected and qualify. Officers are elected by
the Board and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.

NAME AGE POSITION
---- --- --------

Ronald S. Deans 63 Chairman of the Board of Directors,
President, Chief Executive Officer, Chief
Financial Officer and Secretary
Mark G. Deans 31 Director, Executive Vice President-Marketing
R. Scott Deans 34 Director, Executive Vice President-Operations
Moises Cosio 65 Director
Alan D. Tuck Jr. 53 Director
Robert S. Parker 50 Director
Luis Alberto Morato 36 Director

RONALD S. DEANS has served as the Chairman, Chief Executive Officer and
President of the Company since he founded the Company in 1973. He has also
served as the Company's interim Chief Financial Officer and Secretary since
September 4, 1996. The Company expects to name a new Chief Financial Officer and
Secretary in the near future. Mr. Deans has over thirty years experience in the
graphics arts and office products retailing industry. Prior to founding the
Company , he had served as sales manager for Letraset Canada Ltd. Mr. Deans is
responsible for strategic planning and business development of the Company.

MARK G. DEANS joined the Company in May 1985 working in the marketing
department. Mr. Deans was promoted to Vice President-Marketing in April 1990,
and was promoted to Executive Vice President-Marketing in September 1995. Mr.
Deans has served as a director of the Company since November 1994. Ronald S.
Deans is the father of Mark G, Deans. Mr. Deans is responsible for the
development of new products, sales and marketing programs including
relationships with major customers.

R. SCOTT DEANS joined the Company in February 1985 working in the marketing
and operations departments. Mr. Deans was promoted to Vice President-Operations
in January 1990, and promoted to Executive Vice President-Operations in
September 1995. Mr. Deans has served as a director of the Company since
September 1995. Ronald S. Deans is the father of R. Scott Deans. Mr. Deans is
responsible for all manufacturing operations of the Company.

MOISES COSIO has served on the Company's board of directors since January
1995. Mr. Cosio is an international financier residing in Mexico. Mr. Cosio has
been appointed to various boards including Telefonos de Mexico, a publicly
traded company, and has investment interests in Grupo Carso, InverMexico,
Mexican subsidiaries of Kimberly-Clark and John Deere. Mr. Cosio also owns
luxury hotels in Ixtapa, Acapulco and Mexico City.

ALAN D. TUCK JR. has served on the board of directors of the Company since
August 1995. Mr. Tuck is President of Greenway Pump Inc., a privately held
company performing research an development of hydraulic pumps since March 1992.
Mr. Tuck is also an inventor and holder of several U.S. patents. From July 1989
to March 1992, Mr. Tuck operated Fluid Systems Engineering, a privately held
company performing research and development of hydraulic pumps. Mr. Tuck is a
graduate of the United States Air Force Academy and former U.S. Air Force
Officer and a recipient of a Juris Doctor Degree from the University of
California School of Law in Davis, California.

ROBERT S. PARKER has served on the Board of Directors since April 1996. Mr.
Parker has been the President of Sanford Corporation, a manufacturer of writing
instruments and office supplies, since December 1990. Sanford Corporation is a
subsidiary of Newell Co., a publicly traded company.

<PAGE>

LUIS ALBERTO MORATO has been a director of the Company since October 1995.
From March 1993 to the present, Mr. Morato has been an independent civil
engineering consultant. From June 1982 to March 1993, Mr. Morato was a budget
manager with Bytsa De C.V. Mr. Morato is the son-in-law of Mr. Fidel Garcia
Carrancedo, a former director of the Company and current principal stockholder
of the Company.

The Company pays each non-employee director a fee of $500 per month, plus
$750 for each Board of Directors meeting attended. Directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance of Board of Directors meetings. Directors of the
Company who are also employees of the Company do not receive fees for their
services as directors.

BOARD COMMITTEES AND MEETINGS

During the fiscal year ended March 31, 1996, there were two (2) Meetings of
the Company Board of Directors. Each Board member attended 75% or more of the
aggregate of the Meetings of the Board of Directors and the Meetings of all
Committees of the Board of Directors on which they served.

The Audit Committee was established in April 1991. The Audit Committee's
function is to make recommendations concerning the effectiveness of the
Company's internal auditing methods and procedures, to determine through
discussions with independent auditors whether any limitations or restrictions
have been placed upon them in connection with either the scope of the audit or
its implementation, to review the financial statements and related notes with
the auditors to ensure the statements and notes fully disclose all material
facts of the Company, and to recommend approval or non-approval of such
financial statements and related notes. The members of the Audit Committee are
currently Alan D. Tuck, Jr., Chairman and Ronald S. Deans. Fidel Garcia
Carrancedo was previously a member of the Audit Committee through September 20,
1996, at which time he resigned from the Board of Directors. The Board intends
to replace this position on the Audit Committee as soon as practical. The Audit
Committee met one time during fiscal 1996 and all members attended the meeting.

The Compensation Committee was established in April 1991. The Compenstion
Committee's function is to monitor and make recommendations with respect to
compensation of senior officers, as well as the granting of stock options and
stock awards. The members of the Compensation Committee are Robert S. Parker,
Chairman, Ronald S. Deans and Alan D. Tuck, Jr. The Compensation Committee met
one time during fiscal 1996 and all members attended the meeting.

The Company does not have a nomination committee.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

CASH COMPENSATION

Total cash compensation paid to all executive officers as a group for
services provided to the Company in all capacities during the year ended March
31, 1996 aggregated to $696,781. Set forth below is a summary compensation
table in the tabular format specified in the applicable rules of the Securities
and Exchange Commission. As indicated, no officer of the Company or any of its
subsidiaries, except for Mr. Ronald S, Deans, Mr. Mark G, Deans and Mr. R. Scott
Deans, received total salary and bonus which exceeded $100,000 during the
periods reflected.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Restricted Other
Principal Other Annual Stock Options/ LTIP All
Position Period Salary Bonus Compensation Award(s) SARs(#) Payouts Compensation
- -------- ------ ------ ----- ------------ -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald S. Deans 1996 $234,000 $87,629 0 0 30,000 0 $321,629
Chairman, 1995 181,666 0 0 0 0 0 181,666
President & CEO 1994 180,000 0 0 0 20,000 0 180,000

Mark G. Deans 1996 $111,694 $28,184 0 0 32,000 0 139,878
Director 1995 79,243 0 0 0 30,000 0 79,243
Executive Vice 1994 75,000 0 0 0 14,000 0 75,000
President-Marketing

R. Scott Deans 1996 $111,694 $28,184 0 0 32,000 0 139,878
Director 1995 79,243 0 0 0 30,000 0 79,243
Executive Vice 1994 75,000 0 0 0 14,000 0 75,000
President-Operations

Terry A. Fife 1996 $ 86,914 $ 8,482 0 0 0 0 95,396
Secretary 1995 31,911* 0 0 0 54,000 0 31,911
Vice President- 1994 0 0 0 0 0 0 0
Finance & CFO
</TABLE>
* Mr. Fife was hired in October 1994, and resigned September 4, 1996.

EMPLOYMENT AGREEMENTS

The Company has no written employment agreements with any of its officers
or directors as of March 31, 1996, although the Company intends to establish
written agreements with its officers and directors in the future.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Percent of Number Total Options/SARs Exercise or
of Securities Underlying Granted to Employees Base Price Expiration
Name Options/SARs Granted (#) in Fiscal Year ($/Sh) Date
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ronald S. Deans 6.0% 30,000 Cdn $2.30 August 18, 2000
Mark G. Deans 6.5% 12,000 Cdn $2.00 April 25, 2000
20,000 Cdn. $4.15 October 10, 2000
R. Scott Deans 6.5% 12,000 Cdn $2.00 April 25, 2000
20,000 Cdn. $4.15 October 10, 2000
</TABLE>

<PAGE>

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Option/SARs at Options/SARs at
Shares FY-End (#) FY-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ronald S. Deans 90,000 $373,543 0/30,000 $0/92,347
Mark G. Deans 86,000 $353,253 0/20,000 $0/34,671
R. Scott Deans 86,000 $353,253 0/20,000 $0/34,671
Terry A. Fife 54,000 $207,127 0 0
</TABLE>
As of March 31, 1996, the Company had reserved 220,000 shares of common
stock for issuance to key employees, officers and directors. Options to purchase
the Company's common stock are granted at a price equal to the market price of
the stock at the date of grant, and are exercisable upon issuance and regulatory
approval. All options expire no more than five years after the date of grant.
Option prices per share are expressed in Canadian dollars. The rate of exchange
as of November 15, 1996 was US $.752 = Cdn $1.00.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

Mr. Ronald S. Deans, a member of the Company's Compensation and Audit
Committee, is the Company's President, Chief Executive Officer, Chief Financial
Officer, Chairman, Director and Principal Shareholder of the Company. During the
fiscal year ended March 31, 1996, Mr. Deans received $321,629 in salary, bonus
and stock compensation.

BOARD OF DIRECTORS COMPENSATION REPORT ON EXECUTIVE COMPENSATION

The Company's Compensation Committee (the "Committee") is comprised of
Robert S. Parker, Chairman, Alan D. Tuck, Jr. and Ronald S. Deans. Mr. Parker
and Mr. Tuck are outside directors, while Mr. Deans is an inside director. The
committee has the overall responsibility to review and approve the Company's
executive compensation programs. To assist the Company in recruiting, motivating
and retaining high caliber executives, the Company has approved a compensation
policy that pays key executives for superior results. The current compensation
program for executive officers consists of three major elements: (1) base
salary, (2) performance based discretionary cash bonus and (3) periodic stock
option grants.

BASE SALARY. It is the policy of the Company to review executive officer
base salaries each year in relation to comparable positions of responsibility in
similar sized companies. This does not assure an increase in salary. In
establishing base salary levels, the Committee considers the competitiveness of
the entire compensation package.

STOCK OPTION GRANTS. The Company believes that the ability to use the
Stock Option Plan to attract and retain key personnel has been essential to the
growth of the Company. Stock option grants are designed to concurrently reward
the stockholders and recipients since the executive officers realize increases
in value from the stock options will occur only if the stock price, and thus
stockholder value, also increases. Additionally, this element of compensation
encourages and creates ownership and retention of the Company's stock by key
employees and further aligns the long-range interests of these employees with
those of the stockholders by allowing key employees to build a meaningful
ownership stake in the Company.

CHIEF EXECUTIVE OFFICER COMPENSATION. It is the policy of the Compensation
Committee to review the base salary of the Chief Executive Officer each year in
relation to comparable positions of responsibility in companies of similar size.
This does not assure an increase in salary. Mr. Deans base salary was $234,000
during the fiscal year ended March 31, 1996, an increase of $52,334 over Mr.
Deans base salary during the fiscal year ended March 31, 1995. This increase was
approved by the Compensation Committee and was based upon the significant
increase in the growth and profitability of the Company during the fiscal years
ended March 31, 1996

<PAGE>

and 1995. Mr. Deans also received a bonus of $87,629 during the fiscal year
ended March 31, 1996, an increase of $87,629 over the fiscal year ended March
31, 1995. This bonus was approved by the Compensation Committee and was based
upon a fixed calculation tied to the relative growth of the Company's sales and
profitability. The output of this calculation is then adjusted by the
Compensation Committee for Mr. Deans contributions to the relative growth and
profitability of the Company in relation to those benchmarks created by the
Compensation Committee to evaluate the performance of Mr. Deans as Chief
Executive Officer.

COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(M) of
the Internal Revenue Code, as amended, generally disallows a tax deduction to
public companies for compensation for over $1 million paid to the Chief
Executive Officer and the Company's four other most highly-paid executive
officers. Performance based compensation is not subject to the deduction limit
if certain requirements are met. The Company intends to structure the
performance-based position of the compensation to its executive officers, when
and if awarded in the future, in a manner that complies with the statute.

PERFORMANCE GRAPH

The Securities and Exchange Commission requires that the Company include a
line-graph presentation comparing cumulative, five-year stockholder returns on
an indexed basis with a performance indicator of the overall stock market and
either a published industry index or company-determined peer group. The Company
has elected to exclude this information from this filing as the Company became
listed on NASDAQ shortly before year end. Consequently, pertinent market
information related to stockholder returns for the previous five years is not
available.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth Common Stock ownership as of November 8,
1996 with respect to (i) each person known to the Company to be the beneficial
owner of five (5%) or more of the Company's outstanding Common Stock, (ii) each
director of the Company and (iii) all executive officers and directors of the
Company as a group. This information as to beneficial ownership was furnished to
the Company by or on behalf of the persons named. Information with respect to
the percent of class is based on 9,416,877 shares of the Company's Common Stock
issued and outstanding as of November 8, 1996.

Shares Percent
Name and Address (1) Beneficially Owned(2) of Class
--------------------- --------

Ronald S. Deans (3) 716,907 7.6%
Mark G. Deans (4) 442,279 4.7%
R. Scott Deans (5) 444,518 4.7%
Moises Cosio (6) 169,600 1.8%
Alan D. Tuck Jr. (7) 150,512 1.6%
Robert Parker (8) 30,000 .3%
Luis Alberto Morato (9) 20,000 .2%
All Officers and Directors as a Group (7 persons) 1,973,816 20.0%
Fidel Garcia Carrancedo (10) 1,426,968 15.2%
Platinum Partners, L.P.,
Mr. Calvin Hori, Hori Capital Management (11) 660,000 7.0%

(1) Unless otherwise indicated, the address of each of the listed beneficial
owners identified is 1555 Odell Road, Blaine, Washington 98231. Unless
otherwise noted below, the Company believes that all persons named in the
table have sole voting and investment with respect to all of the shares of
Common Stock beneficially owned by them.

(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this filing upon
the exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that warrants or options that are held
by such person (but not those held by any other person) and that are
exercisable within 60 days of this filing have been exercised.

(3) Mr. Ronald Deans is Chairman of the Board, President, Chief Executive
Officer and Chief Financial Officer of the Company. Includes 43,000 shares
in the name of his wife, Ann Deans, and 28,775 shares held by the
Geographics, Inc. 401(k) Plan for which Mr. Deans has voting control. The
beneficially owned shares for Mr. Deans also includes 30,000 shares of
Common Stock issuable upon exercise of certain stock options by Mr. Deans.
His options are exercisable at $2.30 Cdn. and expire August 18, 2000. The
shares beneficially owned by Mr. Deans also includes 9,756 shares and 9,756
warrants purchased by Mr. Deans in the May 1996 Offering.

(4) Mr. Mark Deans is a Director and Executive Vice President - Marketing of
the Company. Includes 20,000 shares of Common Stock issuable upon exercise
of certain stock options by Mr. Deans. His options are exercisable at $4.15
Cdn. and expire October 10, 2000.

(5) Mr. Scott Deans is a Director and Executive Vice President - Marketing of
the Company. Includes 20,000 shares of Common Stock issuable upon exercise
of certain stock options by Mr. Deans. His options are exercisable at $4.15
Cdn. and expire October 10, 2000.

(6) Mr. Cosio is a Director of the Company.

(7) Mr. Tuck is a Director of the Company. Includes 30,000 shares of Common
Stock issuable upon exercise of certain stock options by Mr. Tuck. His
options are exercisable at $2.30 Cdn. and expire August 18,

<PAGE>

2000. The shares beneficially owned by Mr. Tuck also includes 9,756 shares
and 9,756 warrants purchased by Mr. Tuck in the May 1996 Offering.

(8) Mr. Parker is a Director of the Company.

(9) Mr. Morato is a Director of the Company. Includes 20,000 shares of Common
Stock issuable upon exercise of certain stock options by Mr. Morato. His
options are exercisable at $4.15 Cdn. and expire October 10, 2000.

(10) Mr. Carrancedo is a former Director of the Company who resigned from that
position on September 20, 1996 for personal reasons. His address is 555
Reforma, Mexico City, Mexico.

(11) The address for each of these persons is One Liberty Square, Fourth Floor,
Boston, MA 02109. The information is based solely upon a Schedule 13D
dated June 27, 1996. Of the 660,000 shares shown as beneficially owned by
Platinum Partners, Mr. Calvin Hori, and Hori Capital Management, Inc., Mr.
Hori has sole voting power and sole dispositive power of such shares.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than 5%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
These insiders are required by the Securities and Exchange Commission's
regulations to furnish the Company with copies of all Section 16(a) forms they
file, including Forms 3, 4, and 5.

To the Company's knowledge, based solely upon review of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended March 31, 1996, all such Section 16(a)
filing requirements appear to be satisfied.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

DEBT AND EQUITY INSTRUMENTS ISSUED TO OFFICERS AND DIRECTORS

During the three years ended March 31, 1996, the Company concluded several
transactions involving officers and directors of the Company. These transactions
included the issuance of convertible debentures, the conversion of debentures
into common shares and private placements of common shares. These transactions
are as follows:

On June 29, 1993, the Company completed a private placement of $1,000,000
of 8% convertible debentures to nine Canadian residents, none of which were
officers, directors or otherwise related to the Company at the time. Richard
Thompson, a former Director of the Company from September 1993 to October 1995
(whose principal amount of debenture equaled $100,000 convertible into 90,400
shares of Common Stock) was an original participant in the private placement.
The principal amount of the debentures were convertible at the option of the
holders at the rate of 904 common shares per principal amounts of $1,000.
Holders of the debentures converted an aggregate $990,000 principal amounts for
894,960 shares of Common Stock and $10,000 principal amounts for 9,040 shares of
Common Stock during the years ended March 31, 1996 and 1995, respectively. The
outstanding balances of the convertible debentures were $0, $990,000 and
$1,000,000 at March 31, 1996, 1995 and 1994, respectively.

On April 18, 1994, the Company completed a private placement of $200,000 of
convertible debentures which paid interest at a rate of prime plus 2% and were
convertible into Common Stock of the Company at Cdn$1.25 per share, not to
exceed a total of 219,178 shares of Common Stock of the Company. The debentures
were purchased by Ronald S. Deans, the Company's Chairman of the Board,
President, Chief Executive Officer and Chief Financial Officer (whose principal
amount of debenture equaled $100,000, convertible into 109,589 shares of Common
Stock), and Fidel Garcia Carrancedo, a former Director and current principal
stockholder of the Company (whose principal amount of debenture equaled
$100,000, convertible into 109,589 shares of Common Stock). On September 15,
1995, Ronald S. Deans and Fidel Garcia Carrancedo each converted debentures in
the amount of $100,000 into 109,589 shares of Common Stock (for an aggregate
amount of $200,000 into 219,178 shares of Common Stock). The outstanding
balances of the convertible debentures were $0 and $200,000 at March 31, 1996
and 1995, respectively.

On March 23, 1995, Ronald S. Deans (whose principal amount of debenture
equaled $100,000, convertible into 93,063 shares of Common Stock), Fidel Garcia
Carrancedo (whose principal amount of debenture equaled $200,000, convertible
into 186,127 shares of Common Stock), Mark G. Deans, a Director and Executive
Vice President-Marketing of the Company (whose principal amount of debenture
equaled $25,000, convertible into 23,266 shares of Common Stock), and R. Scott
Deans, a Director and Executive Vice President-Operations of the Company (whose
principal amount of debenture equaled $25,000, convertible into 23,266 shares of
Common Stock) converted $287,042 of the principal amount into 325,722 shares of
Common Stock of the Company. The remaining balance of these convertible
debentures ($62,958) were repaid in connection with the March 30, 1995 warrant
exercise discussed below. These debentures were issued during 1991 and were
convertible at the holders option into common shares of the Company at Cdn$1.25
per share to a maximum of 325,722 shares of Common Stock. These debentures also
had attached warrants to purchase an additional 325,722 shares of Common Stock
at Cdn$1.25 per share. The outstanding balances of the convertible debentures
were $0, $0 and $350,000 at March 31, 1996, 1995, and 1994, respectively.

On March 30, 1995, Ronald S. Deans (93,063 shares of Common Stock), Fidel
Garcia Carrancedo (186,127 shares of Common Stock), Mark G. Deans (23,266 shares
of Common Stock), and R. Scott Deans (23,266 shares of Common Stock) exercised
325,722 warrants to purchase 325,722 shares of Common Stock at Cdn$1.25 per
share., for which the Company received gross proceeds of US$287,043. The
remaining balance of the convertible debentures noted above and cash from the
warrant-holders funded the entire amount received by the Company in
consideration for the Common Stock issuance.

On September 26, 1995, the Company issued $996,000 of convertible
debentures payable to certain officers and directors of the Company, including
Ronald S. Deans (whose principal amount of debenture equaled $527,882,
convertible into 145,344 shares of Common Stock), Fidel Garcia Carrancedo (whose
principal amount of debenture equaled $328,680 convertible into 90,497 shares of
Common Stock), Mark G. Deans (whose principal

<PAGE>

amount of debenture equaled $69,719, convertible into 19,196 shares of Common
Stock), and R. Scott Deans (whose principal amount of debenture equaled $69,719,
convertible into 19,196 shares of Common Stock). The debentures were convertible
at the holders option into shares of Common Stock of the Company at Cdn. $4.45
per share, to a maximum 274,233 shares of Common Stock. On December 22, 1995,
these debentures were converted into 274,233 shares of Common Stock, and are no
longer outstanding.

On January 23, 1996, the Company completed a private placement of 500,000
shares of Common Stock with certain officers and directors of the Company
including Ronald S. Deans (136,000 shares of Common Stock), Fidel Garcia
Carrancedo (200,000 shares of Common Stock), Mark G. Deans (65,000 shares of
Common Stock), and R. Scott Deans (79,000 shares of Common Stock). Each share
was purchased at a price of Cdn. $5.75. Total cash proceeds received by the
Company were US$2,117,092 and the net cash proceeds to the Company were
US$1,906,100.

At March 31, 1996, Ronald S. Deans ($1,212,707) and Fidel Garcia Carrancedo
($52,004) had advanced the Company an aggregate of $1,264,711 in the form of
uncollateralized notes payable. The notes are payable on demand and are
classified as current liabilities of the Company. Interest on these notes are
payable monthly at the rate of prime plus 1%.

Total interest costs associated with the notes and debentures with related
parties was approximately $60,000 during the years ended March 31, 1996 and
1995.

MARTIN DISTRIBUTION

Martin Distribution Inc. ("Martin") acted as a national distributor of the
Company's products in Canada from September 1990 through March 31, 1996. Martin
is owned by the estate of Martin Carrancedo, a former director of the Company.
Martin imported the Company's products into Canada, facilitated customs clearing
and distributed the Company's products to customers in Canada. Prior to March
31, 1996, all sales of the Company's products within Canada were sold through
Martin. Sales to Martin amounted to $2,854,935, $1,056,750 and $530,462 during
the years ended March 31, 1996, 1995 and 1994, respectively. Trade receivables
due from Martin amounted to $899,422 and $338,875 at March 31, 1996 and 1995,
respectively.

Martin sold product valued at $118,659, $261,765 and $496,762 during the
years ended March 31, 1996, 1995 and 1994, respectively to International
Geographics of Ontario ("IGO"). IGO is a partnership which is 70% owned by the
Company and 30% owned by a marketing agent of the Company. IGO was dissolved
during fiscal 1996, its functions will be assumed by Geographics Marketing
Canada Inc.

The Company recorded management fee income from Martin and IGO of $155,651
and $46,477, respectively during the year ended March 31, 1994.

Mark G. Deans, a director and officer of the Company, serves as a director
of Martin Distribution Inc. Fidel Garcia Carrancedo, a former director and
principal stockholder of the Company, is the brother of the late Martin
Carrancedo. There is no relationship, however, between Fidel Garcia Carrancedo
and Martin Distribution Inc. Effective April 1, 1996 the Company will replace
Martin as it's Canadian national distributor with Geographics Marketing Canada
Inc., a wholly owned subsidiary of the Company. The Company does not expect the
substitution of Geographics Marketing Canada Inc. for Martin to have any
material affect on sales or profits.

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. and (a) 2. Financial Statements and Schedules

The financial statements listed on the index to financial statements
incorporated in this Form 10-K.

(b) Reports on Form 8-K

No reports were filed by the Company on Form 8-K during the fiscal year
ended March 31, 1996.

(d) Financial Statement Schedules Excluded From the Annual Report to
Shareholders

Not applicable.

(a) 3. and (c) Exhibits

The following Exhibits are incorporated by reference or included in this
report:

NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------

3.1 Restated Articles of Incorporation (1)
3.2 Restated Bylaws (1)
3.3 Geographics Marketing Canada Inc. - Articles of Incorporation.(2)
3.4 Geographics (Europe) Limited - Articles of Association (2)
4.1 Directors Resolution and Private Placement Subscription
Agreements for $1,000,000
Convertible Debentures dated June 23, 1993. (1)
10.1 Agreements whereby the Company acquired the assets of the letter
division of E.Z.
Industries Inc., dated July 2, 1993. (1)
10.2 Lease - 4030 Iron Gate (2)
10.3 Lease - Unit 4 Iceni Court (2)
10.4 Loan Documents (2)
21.1 List of the Company's subsidiaries (2)
27.1 Financial Data Schedule (2)

(1) Incorporated by reference to the Exhibits to the Registration Statement on
Form 10 as amended, as filed with the Securities and Exchange Commission
effective date November 11, 1995.

(2) Incorporated by reference to the Exhibits to the Annual Report on
Form 10-KSB for the year ended March 31, 1996, as previously filed
with the Securities and Exchange Commission.

<PAGE>

SIGNATURE

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized on this 22nd day of November 1996.

GEOGRAPHICS, INC.

By: /s/ Ronald S. Deans
---------------------------
Ronald S. Deans, Chairman of the Board,
President, Chief Executive Officer, Chief
Financial Officer and Secretary

In accordance with the Exchange, this Report has been signed below by the
following person on behalf of the Registrant, and in the capacities and on the
date indicated.

SIGNATURE
Chairman of the Board,
President, Chief Executive
Officer, Chief Financial
/s/ Ronald S. Deans Officer and Secretary November 22, 1996
- -------------------------
Ronald S. Deans

Director, Executive
/s/ Mark G. Deans Vice President-Marketing November 22, 1996
- -------------------------
Mark G. Deans

Director, Executive
/s/ R. Scott Deans Vice President-Operations November 22, 1996
- -------------------------
R. Scott Deans

/s/ Alan D. Tuck Jr. Director November 22, 1996
- -------------------------
Alan D. Tuck Jr.

/s/ Robert S. Parker Director November 22, 1996
- -------------------------
Robert S. Parker

<PAGE>

GEOGRAPHICS, INC.
TABLE OF CONTENTS
March 31, 1996, 1995 and 1994

PAGE

INDEPENDENT AUDITOR'S REPORT. . . . . . . . . . . . . . . . . . . . . . . . 1

CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Statement of Income. . . . . . . . . . . . . . . . . . . . . . . . . . 3

Statement of Stockholders' Equity. . . . . . . . . . . . . . . . . . . 4

Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . 5

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . .6-14

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Stockholders
Geographics, Inc.

We have audited the accompanying consolidated balance sheets of Geographics,
Inc. as of March 31, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Geographics, Inc.
as of March 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

The consolidated financial statements for the year ended March 31, 1994 were
audited by other auditors whose report dated August 12, 1994 expressed an
unqualified opinion on those statements.

/s/ Moss Adams LLP

Bellingham, Washington
May 31, 1996

<PAGE>
GEOGRAPHICS, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1996 and 1995

<TABLE>
<CAPTION>
ASSETS
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 50,028 $ 15,348
Accounts Receivable
Trade receivables, net of allowance for doubtful accounts
of $146,926 in 1996 and $115,000 in 1995 4,974,156 2,412,324
Related party receivables 899,422 338,975
Other receivables 62,572 59,215
Inventory 9,139,273 2,901,155
Deferred income taxes 970,000 69,000
Prepaid expenses and equipment deposits 793,409 331,803
----------- -----------

Total current assets 16,888,860 6,127,820

PROPERTY, PLANT AND EQUIPMENT, net 7,286,694 3,792,192

DEFERRED INCOME TAXES 192,000 460,000

INVESTMENTS IN PARTNERSHIPS (34,484) (91,270)

OTHER ASSETS 404,971 166,163

GOODWILL, net - 159,768
----------- -----------

TOTAL ASSETS $24,738,041 $10,614,673
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Note payable to bank $5,322,939 $2,183,476
Accounts payable 2,634,598 1,318,601
Accrued liabilities 1,033,905 409,149
Income tax payable 145,278 8,633
Notes payable to officers and directors 1,264,711 -
Current portion of long-term debt 656,398 371,525
----------- -----------

Total current liabilities 11,057,829 4,291,384

LONG-TERM DEBT 3,690,360 3,319,948

DEBENTURES AND NOTES PAYABLE TO OFFICERS AND DIRECTORS - 200,000
----------- -----------

Total liabilities 14,748,189 7,811,332
----------- -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock - 10,000,000 authorized, 8,004,584 and 5,176,213
issued and outstanding in 1996 and 1995, respectively 9,620,068 3,665,581
Retained earnings (accumulated deficit) 369,784 (862,240)
----------- -----------

Total stockholders' equity 9,989,852 2,803,341
----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,738,041 $10,614,673
----------- -----------
</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.

2
<PAGE>
GEOGRAPHICS, INC.
CONSOLIDATED STATEMENT OF INCOME
Years Ended March 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
SALES
Retail sales $19,758,700 $9,129,886 $6,370,413
Related party sales 2,854,935 1,056,250 530,462
------------- ------------- -------------
Total sales 22,613,635 10,186,136 6,900,875

COST OF SALES 14,194,505 5,881,649 4,359,505
------------- ------------- -------------
Gross margin 8,419,130 4,304,487 2,541,370

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,734,901 2,873,476 3,109,562

AMORTIZATION OF GOODWILL 159,768 639,067 479,300
------------- ------------- -------------
Income (loss) from operations 2,524,461 791,944 (1,047,492)
------------- ------------- -------------

OTHER INCOME (EXPENSE)
Other income 130,090 1,930 196,834
Interest expense (787,848) (457,499) (356,060)
------------- ------------- -------------
Total other income (expense) (657,758) (455,569) (159,226)
------------- ------------- -------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 1,866,703 336,375 (1,206,718)

INCOME TAX PROVISION (BENEFIT) 634,679 (411,367) 34,800
------------- ------------- -------------
NET INCOME (LOSS) $1,232,024 $747,742 $(1,241,518)
------------- ------------- -------------

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary $.19 $.16 $(.28)
---- ---- -----
Assuming full dilution $.18 $.14 $(.28)
---- ---- -----

SHARES USED IN COMPUTING EARNINGS PER
COMMON AND COMMON EQUIVALENT SHARE
Primary 6,606,499 4,549,101 4,424,535
------------- ------------- -------------
Assuming full dilution 7,204,220 5,816,260 4,424,535
------------- ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

GEOGRAPHICS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1996, 1995 and 1994

Common Stock Retained
------------------------- Earnings
Shares Amount (Deficit) Total
---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
BALANCE, March 31, 1993 4,231,729 $ 2,887,159 $ (368,464) $ 2,518,695

Common shares issued for cash
on exercise of options 284,000 194,337 - 194,337

Net loss - - (1,241,518) (1,241,518)
---------- ---------- ----------- -----------

BALANCE, March 31, 1994 4,515,729 3,081,496 (1,609,982) 1,471,514

Notes payable and debentures converted
to common stock 334,762 297,042 - 297,042

Common stock issued for cash
on exercise of warrants 325,722 287,043 - 287,043

Net income - - 747,742 747,742
---------- ---------- ----------- -----------

BALANCE, March 31, 1995 5,176,213 3,665,581 (862,240) 2,803,341

Proceeds from issuance of common stock 520,000 1,986,100 - 1,986,100

Notes payable, debentures and other liabilities
converted to common stock 1,540,371 2,169,233 - 2,169,233

Common stock issued for cash on exercise
of stock options and warrants, including
income tax benefit 768,000 1,799,154 - 1,799,154

Net income - - 1,232,024 1,232,024
---------- ---------- ----------- -----------

BALANCE, March 31, 1996 8,004,584 $9,620,068 $369,784 $9,989,852
---------- ---------- ----------- -----------
</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

GEOGRAPHICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended March 31, 1996, 1995 and 1994
Increase (Decrease) in Cash

1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,232,024 $ 747,742 $(1,241,518)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FLOWS FROM OPERATING ACTIVITIES
Depreciation and amortization 1,124,999 1,295,262 936,266
Deferred income taxes 125,000 (529,000) 34,800
Loss on sale of property and equipment 594 13,468 12,687
Equity income from investment in partnerships - - (30,639)
CHANGES IN NONCASH OPERATING ASSETS AND LIABILITIES
Trade receivables (2,561,832) (1,471,823) (287,411)
Related party receivables (560,447) (338,975) 68,758
Other receivables (3,357) (19,504) (12,386)
Inventory (6,238,118) (1,059,674) 22,705
Prepaid expenses and deposits (461,606) (210,110) (51,737)
Accounts payable 1,315,997 1,074,647 82,553
Accrued liabilities 814,756 (48,828) 336,637
Income tax payable 336,645 167,633 (145,852)
---------- ---------- ----------
Net cash flows from operating activities (4,875,345) (379,162) (275,137)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on note payable to bank 3,139,463 990,427 968,835
Proceeds from long-term debt borrowings 1,003,029 765,125 1,351,924
Repayment of long-term debt (467,986) (232,685) (214,904)
Proceeds from notes payable to officers and directors 2,452,573 22,746 49,184
Repayments of notes payable to officers and directors (398,629) (134,888) (10,018)
Proceeds from issuance of common stock 2,827,254 287,043 194,337
---------- ---------- ----------
Net cash flows from financing activities 8,555,704 1,697,768 2,339,358
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment (3,296,165) (1,463,768) (744,701)
Proceeds from sale of equipment 16,741 30,000 98,563
Net advances from (repayments to) partnerships (56,786) 250,422 34,376
Increase in other assets (309,469) (119,912) 14,913
Acquisition of business - - (1,500,000)
---------- ---------- ----------
Net cash flows from investing activities (3,645,679) (1,303,258) (2,096,849)
---------- ---------- ----------
NET CHANGE IN CASH 34,680 15,348 (32,628)
CASH, beginning of year 15,348 - 32,628
---------- ---------- ----------
CASH, end of year $50,028 $ 15,348 $ -
---------- ---------- ----------

NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock on conversion of notes payable,
debentures and other liabilities $ 2,169,233 $ 297,042 $ -
---------- ---------- ----------

Financing obtained directly from sellers in acquisition of equipment $ 1,110,242 $ 346,644 $351,923
---------- ---------- ----------

Income tax benefit related to exercise of stock options and warrants $ 958,000 $ - $ -
---------- ---------- ----------
</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 1 - DESCRIPTION OF OPERATIONS

Geographics, Inc. (the "Company") is a Wyoming corporation with its offices and
main manufacturing facilities located in Blaine, Washington. The Company also
has warehouse/distribution facilities near London, England, and warehouse/
manufacturing facilities in Bellingham, Washington. The Company is a
manufacturer of designer stationeries, value-added papers, lettering, signage
and graphic art products.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Geographics (Europe)
Limited and Geographics Marketing Canada. Significant intercompany transactions
have been eliminated in consolidation.

(b) Accounts Receivable - The Company typically offers credit terms to its
customers, which generally require payment within sixty days. Management
considers all accounts receivable in excess of the allowance for doubtful
accounts to be fully collectible. Accounts receivable are not collateralized.

(d) Property and Equipment - Property and equipment is stated at historical
cost. Depreciation is provided based on useful lives of five to twenty years,
using primarily the straight-line method. Betterments, renewals and repairs that
extend the life of assets are capitalized. Repairs and maintenance items are
expensed when incurred. Depreciation expense was $894,570, $622,737 and $456,956
during the years ended March 31, 1996, 1995 and 1994, respectively.

(e) Goodwill - Goodwill represents the excess of purchase price and related
costs over the value assigned to the net tangible assets of businesses acquired.
Goodwill was amortized on a straight-line basis over a period of two years.

(f) Federal Income Taxes - The Company accounts for income taxes using the
liability method. Under this method, deferred tax assets and liabilities
represent the estimated tax effects of future deductible or taxable amounts
attributed to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. This method also allows
recognition of income tax benefits for loss carryforwards, credit carryforwards
and certain temporary differences for which tax benefits have not previously
been recorded. The tax benefits recognized as assets must be reduced by a
valuation allowance where it is more likely than not the benefits may not be
realized.

(g) Foreign Currency Translation - The financial statements of the Company's
non-U.S. subsidiaries whose "functional" currencies are other than U.S. dollars
are translated at current rates of exchange. Income and expense items are
translated at the average exchange rate for the year. The resulting translation
adjustments are recorded directly into a separate component of stockholders'
equity, if significant. Certain other translation adjustments and transaction
gains and losses are reported in net income in the period they are realized.

(h) Investment in Partnership - The Company accounts for its 70 percent
respective partnership interest in International Geographics of Ontario (the
"Partnership") using the equity method. The effect of consolidating the accounts
of the Partnership would be immaterial to these consolidated financial
statements. Advances between the Company and the Partnership for working capital
purposes are accounted for as changes to investments in Partnership. The
Partnership distributes the Company's products in Canada.

International Geographics of Ontario was dissolved during the current year. The
Company is in the process of winding up the affairs of the partnership at March
31, 1996.

6
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

(i) Earnings per Common and Common Equivalent Shares - Primary earnings per
common share equals net earnings divided by the weighted average number of
common shares outstanding, after giving effect to dilutive stock options and
warrants. Fully diluted earnings per common share equals net earnings plus
after-tax interest incurred on convertible debentures divided by the weighted
average number of common shares outstanding after giving effect to

7
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

dilutive stock options, warrants and shares assumed to be issued on conversion
of the convertible debentures. Fully diluted earnings per common share includes
$44,712 and $66,792 in after-tax interest on convertible debentures during the
years ended March 31, 1996 and 1995, respectively. The stock options, warrants
and convertible debentures are not included in the earnings per share
calculations for 1994 because they are antidilutive.

(j) Capital Stock - The Company follows the practice of recording amounts
received upon the exercise of stock options and warrants by crediting common
stock. No charges are reflected in the consolidated statement of income as
result of the grant or exercise of stock options or warrants. The Company
realizes an income tax benefit from the exercise of certain stock options and
warrants, which results in an increase in common stock and an increase in
deferred tax assets, or reduction in income tax payable, depending on the timing
of the income tax deduction available to the Company.

(k) Reclassifications - Certain prior year amounts have been reclassified to
conform to current year presentation. Such reclassifications had no effect on
previously reported earnings or accumulated deficit.

(l) Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

(m) Advertising Costs - Advertising costs are charged to expense in the period
in which they occur. The Company participates with its customers in cooperative
advertising programs, in which the Company reimburses the customers for a
portion of their advertising costs. Advertising expense amounted to $867,198,
$271,160 and $271,172 in 1996, 1995 and 1994, respectively.

(n) Fair Value of Financial Instruments - Statement of Financial Accounting
Standard ("SFAS") No. 107, DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure of the fair value of financial instruments, both assets and
liabilities, recognized and not recognized, in the consolidated balance sheet of
the Company for which it is practicable to estimate fair value. The estimated
fair values of financial instruments which are presented herein have been
determined by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of amounts the Company
could realize in a current market exchange.

The following methods and assumptions were used to estimated fair value:

- - The carrying amounts of cash, receivables, accounts payable and accrued
liabilities approximate fair value due to their short-term nature.

- - Discounted cash flows using current interest rates for financial
instruments with similar characteristics and maturity were used to
determine the fair value of short- and long-term debt.

There were no significant differences as of March 31, 1996 and 1995 in the
carrying value and fair value of financial instruments.

(o) New Accounting Pronouncements - SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, establishes financial accounting and reporting standards for
stock-based employee compensation plans, including stock option plans, stock
purchase plans, restricted stock, and stock appreciation rights. SFAS No. 123
defines and encourages the use of the fair value method of accounting for
employee stock-based compensation. Continuing use of the intrinsic value based
method of accounting prescribed in ACCOUNTING PRINCIPLES BOARD OPINION NO. 25
("APB 25") for measurement of employee stock-based compensation is allowed with
pro forma disclosures of net income and earnings per share as if the fair value
method of accounting had been applied. Transactions in which equity instruments
are

8
<PAGE>
GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

issued in exchange for goods or services from nonemployees must be accounted for
based on the fair value of the consideration received or of the equity
instrument issued, whichever is more reliably measurable. SFAS No. 123 is
effective for transactions entered into in fiscal years that begin after
December 15, 1995. The Company has determined that it will continue to use the
method of accounting prescribed in APB 25 for measurement of employee stock-
based compensation, and will begin providing the required pro forma disclosures
in its financial statements for the year ending March 31, 1997, as allowed by
SFAS No. 123.

SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-
LIVED ASSETS TO BE DISPOSED OF, establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. Long-lived assets and
certain identifiable intangibles to be held and used by a company are required
to be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Measurement of an impairment loss for such long-lived assets and identifiable
intangibles should be based on the fair value of the asset. Long-lived assets
and certain identifiable intangibles to be disposed of are required to be
reported generally at the lower of the carrying amount or fair value less cost
to sell. SFAS No. 121 is effective for fiscal years that begin after December
15, 1995. Management estimates that SFAS No. 121 will not have a significant
impact on the Company's financial position or results of operations.

NOTE 3 - INVENTORY

1996 1995
------------ ------------
Raw materials $ 1,325,837 $ 971,281
Work in progress 3,304,407 873,799
Finished goods 4,509,029 1,056,075
------------ ------------
$ 9,139,273 $ 2,901,155
------------ ------------
------------ ------------
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
Net Book Value
Accumulated ---------------------------------
Cost Depreciation 1996 1995
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Land $ 114,563 $ - $ 114,563 $ 114,563
Buildings 3,446,169 675,678 2,770,491 1,107,831
Machinery and equipment 4,499,744 2,057,745 2,441,999 1,769,768
Machinery and equipment under capital lease 1,998,853 357,376 1,641,477 741,217
Automobiles 304,071 89,840 214,231 58,813
Leasehold improvements 29,166 1,374 27,792 -
Construction in progress 76,141 - 76,141 -
------------- ------------ ------------ ------------
$ 10,468,707 $ 3,182,013 $ 7,286,694 $ 3,792,192
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</TABLE>
NOTE 5 - FINANCING ARRANGEMENTS

<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Installment notes payable to banks, fixed interest rates ranging from 8.825%
to 10% (in 1995 rates ranged from fixed 10% to prime plus 1.25%), payable
in monthly installments through October 2010, secured by real estate. $ 2,341,057 $ 1,490,753

Capital lease obligations collateralized by certain equipment and fixtures. 1,609,424 736,136
------------- ------------
Balance carried forward $ 3,950,481 $ 2,226,889
------------- ------------
------------- ------------
</TABLE>

9
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 5 - FINANCING ARRANGEMENTS (Continued)
1996 1995
------------- ------------
Balance brought forward $ 3,950,481 $ 2,226,889

Installment notes payable to banks,
interest rates ranging from fixed 9.75% to
variable rates from prime plus 1% to prime
plus 1.5%, payable in monthly installments
through October 2000, collateralized by
certain equipment. 396,277 474,584

Convertible subordinated debentures,
bearing interest at a fixed rate of 8%
per annum, convertible into common
shares of the Company. - 990,000
----------- -----------
4,346,758 3,691,473
Less current portion 656,398 371,525
----------- -----------
$ 3,690,360 $ 3,319,948
----------- -----------
----------- -----------

The prime rate was 8.25% and 9% at March 31, 1996 and 1995, respectively.

The Company has a revolving credit agreement with a bank for up to $12,000,000,
with interest on outstanding advances payable monthly at the bank's prime rate,
with any unpaid advances due in full on July 25, 1996. Total outstanding
advances under revolving credit agreements were $5,322,939 and $2,183,476 at
March 31, 1996 and 1995, respectively.

The revolving credit agreement, installment notes and capital lease obligations
are collateralized by substantially all of the assets of the Company. In
addition, the revolving credit agreement and certain other financing
arrangements require the Company to comply with several debt covenants, the most
restrictive of which includes the maintenance of liquidity and coverage ratios.

The convertible subordinated debentures ("debentures") were convertible at the
holder's option into common shares of the Company at a conversion rate of 904
common shares per $1,000 principal amount of debenture. At March 31, 1996, all
debentures have been converted.

At March 31, 1996, principal payments on long-term debt and capital lease
obligations are expected to be as follows:

1997 $ 656,398
1998 613,783
1999 620,704
2000 632,582
2001 457,210
Thereafter 1,366,081
------------
$ 4,346,758
------------
------------

Future minimum lease payments under capital leases together with the present
value of minimum lease payments as of March 31, 1996 are as follows:

1997 $ 467,662
1998 419,708
1999 409,974
2000 409,404
2001 249,693
------------
Total minimum lease payments 1,956,441
Less amount representing imputed interest 347,017
------------
Present value of minimum lease payments $ 1,609,424
------------
------------

10
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 6 - FEDERAL INCOME TAXES

The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>

1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>

Current provision $ 509,679 $ 117,633 $ -
Deferred provision 125,000 (529,000) 34,800
----------- ------------ ------------
Total income tax provision (benefit) $ 634,679 $ (411,367) $ 34,800
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

The total tax provision differs from the amount computed using the statutory
federal income tax rate as follows:

Tax expense (benefit) at statutory rate $ 635,000 $ 114,000 $ (422,000)
Other differences, net (321) (64,367) (4,200)
Change in valuation allowance for deferred tax assets - (461,000) 461,000
----------- ------------ ------------
Total income tax provision (benefit) $ 634,679 $ (411,367) $ 34,800
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

The significant components of deferred income tax expense (benefit) are as
follows:

Utilization of tax credit carryforward $ 105,000 $ - $ -
Depreciation of plant and equipment 88,000 43,000 30,000
Change in charitable contributions carryforward 31,000 2,000 (33,000)
Inventory differences (10,000) 43,000 (92,000)
Other differences, net (20,000) 13,000 (7,200)
Amortization of goodwill and intangibles (31,000) (175,000) (113,000)
Change in allowance for doubtful accounts (38,000) 4,000 -
Increase in tax credit carryforward - (137,000) (72,000)
Effect of net operating loss carryforwards - 139,000 (139,000)
Change in valuation allowance for deferred tax assets - (461,000) 461,000
----------- ------------ ------------
Total deferred income tax expense (benefit) $ 125,000 $ (529,000) $ 34,800
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
as follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
DEFERRED TAX ASSETS
Income tax benefit related to exercise of stock options and warrants $ 758,000 $ -
Goodwill and intangible assets, principally due to amortization differences 380,000 349,000
Alternative minimum tax credit carryforwards 104,000 209,000
Inventory, principally due to additional cost inventoried for tax purposes
and financial statement allowances 59,000 49,000
Accounts receivable, due to allowance for doubtful accounts 50,000 12,000
Employee benefits, principally due to accruals for financial reporting purposes 21,000 9,000
Other differences, net 4,000 3,000
Charitable contributions carryforward - 31,000
Net deferred tax assets 1,376,000 662,000
DEFERRED TAX LIABILITIES
Plant and equipment, principally due to depreciation differences 214,000 133,000
----------- -----------
Net deferred tax assets $ 1,162,000 $ 529,000
----------- -----------
----------- -----------
</TABLE>

11
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 6 - FEDERAL INCOME TAXES (Continued)

At March 31, 1996 and 1995, the Company's net deferred tax assets are presented
as follows:

1996 1995
----------- ---------
Current deferred tax assets $ 970,000 $ 69,000
Long-term deferred tax assets 192,000 460,000
----------- ----------
$ 1,162,000 $ 529,000
----------- ----------
----------- ----------

The valuation allowance for deferred tax assets as of April 1, 1994 was
$461,000. The net change in the total valuation allowance for the twelve months
ended March 31, 1995 was a decrease of $461,000. Of this amount, $139,000
resulted from the utilization of net operating losses during the year ended
March 31, 1995. An additional $60,000 resulted from realization of tax benefits
of temporary differences which reversed during the year ended March 31, 1995.
The remaining $262,000 decrease resulted from the Company's reevaluation of the
realizability of future income tax benefits expected to be generated through the
utilization of its existing deferred tax assets. Based on the Company's current
operating income and expectations for the future, management determined that
future operating and taxable income will more likely than not be sufficient to
fully recognize all deferred tax assets existing at March 31, 1996 and 1995. As
a result, the carrying value of the net deferred tax asset was increased by
$262,000 at March 31, 1995. This increase was recognized as an income tax
benefit during the year ended March 31, 1995.

At March 31, 1996, the Company has alternative minimum tax credit carryforwards
of approximately $104,000 which are available to reduce future regular federal
income taxes over an indefinite period.

NOTE 7 - RELATED PARTY TRANSACTIONS

On September 15, 1995, officers and directors converted debentures in an
aggregate face amount of $200,000 into 219,178 common shares. The debentures
were convertible at the holder's option into common shares of the Company at
Cdn. $1.25 per share, to a maximum of 219,178 common shares. There is no
remaining balance of these debentures outstanding at March 31, 1996.

The Company issued $996,000 of convertible debentures payable to officers and
directors on September 26, 1995. The debentures were convertible at the holder's
option into common shares of the Company at Cdn. $4.45 per share, to a maximum
274,233 common shares. On December 22, 1995, these debentures were converted
into 274,233 common shares, and are no longer outstanding.

At March 31, 1996, certain officers and directors had advanced the Company
$1,264,711 in the form of uncollateralized notes payable. The notes are payable
on demand and are classified as current liabilities. Interest on these notes are
payable monthly at the rate of prime plus 1%.

Total interest costs associated with these notes and debentures was
approximately $60,000 during each of the years ended March 31, 1996 and 1995.

On January 23, 1996, the Company completed a private placement of 500,000 common
shares to officers and directors at a price of Cdn. $5.75. Total cash received,
net of issuance costs, totaled $1,906,100.

Sales to Martin Distribution, Inc. ("Martin"), a company related through common
directorship, amounted to $2,854,935, $1,056,750 and $530,462 during the years
ended March 31, 1996, 1995 and 1994, respectively. Trade receivables due from
Martin amounted to $899,422 and $338,975 at March 31, 1996 and 1995,
respectively.

The Partnership recorded purchases from Martin in the aggregate amount of
$118,659, $261,765 and $496,762 during the years ended March 31, 1996, 1995 and
1994, respectively.

12
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 7 - RELATED PARTY TRANSACTIONS (Continued)

The Company recorded management fee income from Martin and the Partnership of
$155,651 and $46,477, respectively, during the year ended March 31, 1994.

NOTE 8 - EMPLOYEE BENEFIT PLANS

As of March 31, 1996, the Company had reserved 220,000 shares of common stock
for issuance to key employees, officers and directors. Options to purchase the
Company's common stock are granted at a price equal to the market price of the
stock at the date of grant, and are exercisable upon issuance and regulatory
approval. All options expire no more than five years after the date of grant.
Option prices per share are expressed in Canadian dollars.

Option
Number of Price
Shares per Share
--------- ------------

Outstanding at March 31, 1993 420,000 $0.75 - 1.19
Granted 315,000 $0.90 - 1.26
Exercised (284,000) $0.75 - 1.19
---------
Outstanding at March 31, 1994 451,000 $1.10 - 1.26
Granted 129,000 $1.00 - 1.19
Canceled (128,000) $1.10 - 1.19
---------
Outstanding at March 31, 1995 452,000 $1.00 - 1.26
Granted 246,000 $2,00 - 4.15
Exercised (478,000) $1.00 - 2.00
---------
Outstanding at March 31, 1996 220,000 $1.00 - 4.15
---------
---------

In addition, warrants to purchase 24,000 and 154,000 shares of common stock at
prices ranging from Cdn. $1.05 (U.S. $.75) to Cdn. $6.63 (U.S. $4.77) were
outstanding as of March 31, 1996 and 1995, respectively. These warrants were
granted to key employees of the Company, are exercisable upon issuance and
expire on April 15, 1998 and January 23, 1999. The exercise price of the
warrants was equal to the market price of the stock at the date the warrants
were issued.

On April 1, 1995, the Board of Directors approved a retirement savings plan,
which permits eligible employees to make contributions to the plan on a pretax
salary reduction basis in accordance with the provisions of Section 401(k) of
the Internal Revenue Code. The Company makes a matching stock contribution of
10% of the employee's pretax contribution. Eligible employees may contribute up
to 18% of their pretax compensation. Total expense related to this plan was
$20,619 during the year ended March 31, 1996.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company conducts certain operations in leased facilities, under leases that
are classified as operating leases for financial statement purposes. The leases
provide for the Company to pay real estate taxes, common area maintenance,

13
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

and certain other expenses. Lease terms, excluding renewal option periods
exercisable by the Company at escalated rents, expire between August 1996 and
February 2006. In addition to the base lease term, the Company has various
renewal option periods. In addition, certain equipment used in the Company's
operations is leased under operating leases. A schedule of noncancelable
operating lease commitments are as follows:

1997 $ 154,217
1998 126,589
1999 88,489
2000 35,149
2001 26,434
Thereafter 97,108
----------
$ 527,986
----------
----------

On January 23, 1996, the Company placed an order for a printing press. The cost
of the press is approximately $1,200,000, which is expected to be delivered
during the second quarter of fiscal year 1997. The Company has a commitment from
a financial institution to provide capital lease financing for this equipment.

There are various claims, lawsuits, and pending actions against the Company
incident to the operations of its business. It is the opinion of management that
the ultimate resolution of these matters will not have a material effect on the
Company's financial position, results of operations or liquidity.

NOTE 10 - SUBSEQUENT EVENTS

On May 1, 1996, the Company completed a private placement of 1,268,293 units at
a price of U.S. $5.125 per unit. Total proceeds from this transaction
approximated $6,500,000. Each unit included one common share of the Company and
a warrant to purchase one additional common share of the Company at U.S. $6.50.
The warrants were exercisable upon issuance and regulatory approval, and expire
June 1, 1999.

NOTE 11 - INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS

Assets for which the Company has credit risk include trade accounts receivable,
which amounted to $5,873,578 and $2,751,299 at March 31, 1996 and 1995,
respectively. The Company's trade customers are concentrated in the retail
office products industry and mass market retail stores. Sales to four major
customers approximated 80%, 65% and 59% of total sales for the years ended March
31, 1996, 1995 and 1994, respectively. Amounts due from three customers
approximated 75% and 71% of the total accounts receivable at March 31, 1996 and
1995, respectively.

The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of these few customers. Although the composition of the group comprising the
Company's largest customers may vary from period to period, the loss of a
significant customer or any reduction in orders by any significant customers,
including reductions due to market, economic or competitive conditions in the
designer stationary or specialty papers industry, may have a material adverse
effect on the Company's business, financial condition and results of operations.

The following table represents approximate sales and trade accounts receivable
related to the Geographic regions in which the Company operates.

14
<PAGE>

GEOGRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994

NOTE 11 - INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS (Continued)

1996
-----------------------------------------------------
Total United States Canada Other
--------- ------------- --------- ---------
Sales 100% 86% 13% 1%
--------- --------- --------- ---------
Accounts receivable 100% 83% 15% 2%
--------- --------- --------- ---------

1995
-----------------------------------------------------
Total United States Canada Other
--------- ------------- --------- ---------

Sales 100% 89% 10% 1%
--------- --------- --------- ---------
Accounts receivable 100% 85% 12% 3%
--------- --------- --------- ---------

1994
-----------------------------------------------------
Total United States Canada Other
--------- ------------- --------- ---------

Sales 100% 91% 8% 1%
--------- --------- --------- ---------

The Company purchases goods from approximately 700 vendors. One vendor accounted
for a significant portion of the Company's total merchandise purchases during
the years ended March 31, 1996 and 1995. The Company purchases commodity paper
and other related products from this broker/vendor that could be supplied by
other sources. There can be no assurances that the relationship between the
Company and this vendor will continue and the loss of the purchasing power the
Company has established with this company would likely have a material adverse
effect on the Company. The Company does not consider itself dependent on any
single source for materials to manufacture its products.

NOTE 12 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
Cash paid during the year for interest $ 812,416 $ 465,377 $ 338,558
---------- ----------- ----------
---------- ----------- ----------
Net cash paid (received) during the year for income taxes $ 173,034 $ (50,000) $ 151,996
---------- ----------- ----------
---------- ----------- ----------
</TABLE>