NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
ARROW-MAGNOLIA INTERNATIONAL, INC.
2646 Rodney Lane
Dallas, Texas 75229
To be Held June 27, 1997
Notice is hereby given that the Annual Meeting of Shareholders
of Arrow-Magnolia International, Inc. will be held on Friday, June
27, 1997 at 10:00 a.m., Dallas, Texas time at the Community Room,
Texas Commerce Bank, 12875 Josey Lane, Farmers Branch, Texas 75234,
for the following purposes:
1. To elect a Board of Directors of five (5) persons as
nominated in the accompanying Proxy Statement, such
Directors to hold office until the next annual meeting of
shareholders and until their successors are elected;
2. To ratify the declaration of a 10% stock dividend on the
Company's common stock; and
3. To transact such procedural matters as may properly be
brought before the meeting or any adjournment or
adjournments thereof.
Said meeting may be adjourned from time to time without other
notice than by announcement at said meeting, or at any adjournment
thereof, and any and all business for which said meeting is hereby
noticed may be transacted at any such adjournment.
The Board of Directors has fixed May 23, 1997 as the date for
taking of a record of the shareholders entitled to notice of and to
vote at the meeting and at any adjournment or adjournments thereof.
The stock transfer books will not be closed.
Enclosed is a form of Proxy solicited by the Board of
Directors of the Company. Shareholders who do not plan to attend
the meeting in person are requested to date, sign and return the
enclosed Proxy in the enclosed envelope, to which no postage need
be affixed if mailed in the United States. Your Proxy may be
revoked at any time before it is exercised and will not be used if
you attend the meeting and prefer to vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
MORRIS SHWIFF
President and Chief
Executive Officer
Dallas, Texas
May 23, 1997
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ARROW-MAGNOLIA INTERNATIONAL, INC.
2646 Rodney Lane
Dallas, Texas 75229
PROXY STATEMENT
Solicitation by the Board of Directors
of Proxies from Shareholders for
the Annual Meeting of Shareholders
to be held on June 27, 1997
The Board of Directors of Arrow-Magnolia International, Inc.
(hereinafter called the "Company") solicits your proxy in the
enclosed form, which you are requested to fill out, sign as
indicated and return to the Company in the enclosed, self-addressed
envelope, which requires no postage if mailed in the United States.
You are encouraged to return your completed proxy whether or not
you intend to attend the meeting in person.
Any proxy given pursuant to this solicitation may be revoked
by the person giving it at any time before it is exercised by
filing a written revocation or a duly executed proxy bearing a
later date. Any written revocation may be delivered in person or
mailed to the Company at 2646 Rodney Lane, Dallas, Texas
75229,Attn: President. A shareholder who attends the Annual Meeting
in person may revoke his proxy at the Annual Meeting and vote in
person if he so desires.
Proxies are being solicited by mail and all expenses of
solicitation have been or will be borne by the Company. The
approximate day on which this Proxy Statement and form of proxy
will be sent to security holders is May 30, 1997.
May 23, 1997 has been fixed as the record date for the
determination of shareholders of the Company entitled to notice of
and to vote at the Annual Meeting or at any adjournments thereof.
At the close of business on that date, 2,373,120 shares of Common
Stock, par value $0.10 per share, (the "Common Stock"), were issued
and outstanding, each share entitling the holder thereof to one
vote. Cumulative voting in the election of Directors is not
allowed.
Abstentions and broker non-votes will be counted as present
for purposes of determining the existence of a quorum at the Annual
Meeting. Because Directors are elected by a plurality of the votes
cast by shareholders, abstentions and broker non-votes are not
counted and have no effect in determining which candidates have
received the highest number of votes and are elected, except in
affecting the total number of votes cast for a nominee. With
respect to any matter brought before the Annual Meeting requiring
the affirmative vote of a majority or other proportion of the
outstanding shares, an abstention or non-vote will have the same
effect as a vote against the matter being voted upon.
All shares of the Company represented by proxies relating to
shares of the Common Stock received in time and in proper form and
condition and not revoked will be voted as specified in the proxy,
or in the absence of specific direction, the proxy will be voted by
the person designated therein:
1. FOR the election as Directors of the Company of the five
(5) nominees named below to hold office until the next
annual meeting of shareholders and until their respective
successors shall be duly elected. In the event any of
such nominees should become unable to serve as a
Director, the proxies will be voted in accordance with
the best judgment of the person acting under it.
2. FOR the ratification of the declaration of a 10% stock
dividend on the Company's common stock.
The management knows of no other matters to be submitted to
the 1997 Annual Meeting with respect to which the shareholders are
entitled to vote, but if other procedural matters do properly come
before the meeting, the persons named in the proxy will vote
according to their best judgment.
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SECURITIES OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the
Company's Common Stock owned at May 23, 1997, after giving effect
to a one-for-one stock dividend declared on June 14, 1996, by (i)
each shareholder known to the Company to own beneficially more than
5% of the Company's Common Stock, (ii) each of the Company's
Directors or nominees for Director, and (iii) all officers,
Directors and nominees as a group. All of the officers, Directors
and nominees of the Company, who own beneficially 69.6% of the
Company's Common Stock and 63.9% of the Company's outstanding
Common Stock, have indicated their intention to vote for each of
the nominees to be presented to the shareholders at the Annual
Meeting. These votes, when cast, will be sufficient to assure
election of each of the nominees regardless of whether other
shareholders vote for or against or do not vote with respect to the
nominees.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Class
Morris Shwiff 937,272(1) 37.1%
2646 Rodney Lane
Dallas, Texas 75229
Mark I. Kenner 607,198(2) 24.1%
2646 Rodney Lane
Dallas, Texas 75229
Fred Kenner 371,800(3) 14.8%
2646 Rodney Lane
Dallas, Texas 75229
Robert D. DeRosier 41,300 1.7
Clifton R. Duke - -
All Officers, Directors 1,957,570(4) 69.6%
and Nominees as a Group
(Five Persons)
(1) Includes 154,000 shares which may be acquired upon exercise of
an option at an exercise price of $0.50 per share.
(2) Includes 145,200 shares which may be acquired upon exercise of
an option at an exercise price of $0.50 per share.
(3) Includes 140,800 shares which may be acquired upon exercise of
an option at an exercise price of $0.50 per share.
(4) Includes 440,000 shares which may be acquired upon exercise of
an option at an exercise price of $0.50 per share.
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ELECTION OF DIRECTORS AND INFORMATION
AS TO DIRECTORS AND NOMINEES
At the 1997 Annual Meeting, the shareholders of the Company
will elect five (5) Directors, in each case to hold office until
the next annual meeting and until their respective successors shall
be duly elected. There will be submitted by the Board of Directors
of the 1997 Annual Meeting for election as Directors the following
five (5) nominees:
Morris Shwiff
Mark I. Kenner
Fred Kenner
Robert D. DeRosier
Clifton R. Duke
The Directors, nominees and executive officers of the Company
are as follows:
Name Age Position With Registrant
Morris Shwiff 75 Chairman of the Board,
Director and President
Mark I. Kenner 65 Director and Executive Vice
President
Fred Kenner 44 Director and Vice
President, Secretary and
Treasurer
Robert D. DeRosier 70 Nominee for Director
Clifton R. Duke 62 Nominee for Director
Messrs. Shwiff, Mark Kenner and Fred Kenner were elected a
Directors of the Company on May 30, 1996 and will hold their
positions until their successors are elected.
Each of the above named officers was elected to his respective
offices with the Company by the Board of Directors of the Company
on May 30, 1996, and serve as officers of the Company at the
discretion of the Board of Directors. Mr. Mark I. Kenner is the
father of Mr. Fred Kenner and there is no other family relationship
between any of the executive officers or Directors of the Company.
The principal occupation and employment during the past five
years of the Directors and each of the executive officers of the
Company are as follows:
Morris Shwiff has served as Chairman of the Board of Directors
and President of the Company since December 1985. For more than
five years prior to December 1985, Mr. Shwiff was a Director,
President and principal stockholder of Arrow Chemical Corporation,
which corporation was acquired by the Company in December, 1985.
Mark I. Kenner has served as Director and Executive Vice
President of the Company since December 1985. For more than five
years prior to December 1985, Mr. Kenner was a Director, Vice
President and stockholder of Arrow Chemical Corporation.
Fred Kenner has served as Director and Vice President,
Secretary and Treasurer of the Company since December 1985. For
more than five years prior to December 1985. Mr. Kenner was a
Director, Secretary and Treasurer and stockholder of Arrow Chemical
Corporation.
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<PAGE>
Robert D. DeRosier is the retired Chairman of the Board of
AmRep, Inc., a manufacturer of specialty chemicals, where he served
until 1991. He received a Bachelor of Science in Chemical
Engineering from Northwestern University.
Clifton R. Duke, age 62, is Chairman Emeritus of the Board of
Directors of Container Supply, Inc., the principal business of
which is the distribution and sale of rigid packaging products. He
served as President and Chief Executive Officer of Chemscope
Corporation, the principal business of which is the manufacture and
sale of aerosol and liquid cleaning compounds. Mr. Duke is also
General Partner of D&D Investments, the principal business of which
is real estate development and leasing.
Directors are elected annually and serve until their
successors are duly elected and qualified. Officers serve at the
discretion of the Board.
The Company's Board of Directors has no standing audit,
nominating or compensation committee. During the fiscal year ended
December 31, 1996, the Company's Directors held a total of two
meetings (or their equivalent) and each incumbent Director then
serving participated in all of such meetings (or their equivalent).
Compliance With Section 16(a) of the Exchange Act.
Based solely upon a review of Forms 3, 4 and 5 furnished to
the Company, none of the Directors, executive officers or
beneficial owners of more than 10 percent of the Company's Common
Stock during fiscal 1996 failed to file any report under Section
16(a) of the Exchange Act with respect to the Company's most recent
fiscal year. Only Mr. Shwiff failed to file any such report on a
timely basis, which report was filed within twenty days of the due
date.
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<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the monetary and non-monetary
compensation paid by the Company during the three fiscal years
ended December 31, 1996 to the Company's chief executive officer
and to the Company's other executive officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Name and Annual
Number of Shares
Principal Compensation Subject
to
Position Year Salary Bonus Options Granted
Morris Shwiff, 1996 $140,400 $32,500 0
Chairman of 1995 $130,000 $17,940 0
the Board 1994 $119,900 $ 8,745 154,000
and President
Mark I. Kenner, 1996 $133,900 $30,875 0
Director and 1995 $123,500 $16,887 0
Executive 1994 $112,580 $ 8,208 145,200
Vice President
Fred Kenner, 1996 $127,400 $29,250 0
Director and 1995 $117,000 $15,990 0
Vice President, 1994 $106,600 $ 7,751 140,800
Secretary and
Treasurer
Option Exercises and Fiscal Year End Option Values
The following table reflects option exercises during the
fiscal year ended December 31, 1996, the number of shares
underlying both exercisable and unexercisable options as of the
fiscal year end and the value of unexercised "in the money" options
as of the fiscal year end, after giving effect to a one-for-one
stock dividend declared on June 14, 1996:
Number of
Number Shares UnderlyingValue of Unexercised
of Shares Unexercised Options In the Money Options
Acquired at Fiscal Year End at Fiscal Year End(1)
on Value Unexer- Unexer
Name Exercise Realized Exercisable cisable Exercisable cisable
Morris
Shwiff 0 0 154,000 - $616,000 -
Mark I.
Kenner 0 0 145,200 - $580,080 -
Fred
Kenner 0 0 140,800 - $563,200 -
(1) For purpose of calculating this value, the Company has utilized
the closing price for the Company's common stock as of December 31,
1996 as reported by the NASDAQ SmallCap Market.
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INFORMATION CONCERNING THE STOCK DIVIDEND
On May 23, 1997, the Board of Directors declared a stock
dividend of one share for each ten shares issued and outstanding.
At the Annual Meeting, shareholders will consider whether to ratify
this stock dividend.
In connection with declaring this stock dividend, the Board of
Directors established July 15, 1997 as the record date for
determining shareholders entitled to participate and receive the
stock dividend. Each record holder as of that date shall be
entitled to receive on additional share of Common Stock for each
ten shares held, unless the Directors shall determine to rescind
the dividend after receiving the vote of the shareholders.
No fractional shares will be issued as a result of the share
dividend. Rather, any shareholder who would otherwise receive a
fractional share shall receive a cash payment for the fractional
share equal to the fair market value of the Company's Common Stock
on the record date for such dividend (as determined by the Board of
Directors base upon trading information), multiplied by the
fraction of a share resulting from such dividend.
The Board of Directors have reserved the right to rescind the
declaration of the stock dividend at any time prior to the record
date after the vote of the shareholder is calculated. In the event
that the stock dividend is not rescinded, then issuance and
distribution of stock certificates for the additional shares should
occur shortly after the record date of July 15, 1997.
The declaration of the stock dividend will not affect the
Company's shareholders' equity, but would increase the Company's
stated capital by 10%.
Management believes that increasing the absolute number of
shares available for trading may encourage active trading in the
Company's Common Stock and result in greater liquidity for the
Company's shares. Management therefore hopes that the dividend
will make the investments of existing shareholders more liquid and
may facilitate future offerings by creating an active market. The
Company has no existing plans, undertakings, arrangements or
agreements to conduct any additional offerings, however, and has
not entered into any negotiations for such purpose. Furthermore,
management has no present plans to adopt any anti-takeover or
similar measures to ensure retention of control in connection with
the dividend, nor is management aware of any efforts, within the
past year, to obtain control of the Company.
No approval of the shareholders is required to permit the
stock dividend to be made, and the distribution of the stock
dividend may proceed at the discretion of the Board of Directors
regardless of the votes cast. Rather, the Board of Directors is
requesting the vote of shareholders in order to gauge the
receptivity of shareholders to the dividend. The Board will
consider the votes cast before determining whether to rescind the
dividend.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected KPMG Peat
Marwick LLP as the Company's independent auditors for fiscal 1997.
Representatives of KPMG Peat Marwick are expected to be present at
the Annual Meeting of Shareholders on June 27, 1997 to make any
statement if they desire to do so and to respond to any appropriate
questions of the shareholders.
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SHAREHOLDERS' PROPOSALS
The day by which proposals of shareholders intended to be
presented at the 1998 annual meeting of shareholders must be
received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting is January 23,
1998. It is important that proxies be returned promptly.
Shareholders are requested to date, sign and return the enclosed
proxy in the enclosed envelope, to which no postage need be affixed
if mailed in the United States. If you attend the 1997 Annual
Meeting, you may revoke your proxy and vote in person if you so
desire, otherwise your proxy will be voted for you.
BY ORDER OF THE BOARD OF DIRECTORS
Morris Shwiff, President
Dallas, Texas
May 23, 1997
NOTICE: Upon written request from a shareholder of record at May
23, 1997 (or from any beneficial owner representing that he is or
was entitled to vote at the meeting), the Company will furnish
without charge a copy of its Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996, as filed with the Securities
and Exchange Commission, including financial statement and
schedules thereto and a list of exhibits not contained therein. The
Company will furnish copies of the full text of any such exhibits,
if requested, upon payment in advance of the fee prescribed
therefor as specified in the list of exhibits accompanying the
Annual Report on Form 10-KSB. Such fee will reflect the Company's
reasonable expenses incurred in providing copies of the exhibits.
Requests should be directed to:
Morris Shwiff
Arrow-Magnolia International, Inc.
2646 Rodney Lane
Dallas, Texas 75229
<PAGE>
<PAGE>
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF
ARROW-MAGNOLIA INTERNATIONAL, INC.
The undersigned shareholder of Arrow-Magnolia
International,Inc. (the "Company"), revoking all prior proxies,
does by these presents name, constitute and appoint Morris Shwiff
and Fred Kenner and each of them, the true and lawful proxy and
attorney-in-fact of the undersigned, with full power of
substitution, to vote all shares of the Common Stock, par value
$0.10 per share, of the Company standing in the name of the
undersigned on the books of the Company at the close of business on
May 23, 1997 or in respect of which the undersigned is entitled to
vote at the Company's Annual Meeting of Shareholders, to be held on
June 27, 1997 at the Community Room, Texas Commerce Bank, 12875
Josey Lane, Farmers Branch, Texas 75234, and at any and all
adjournments thereof, on the following matters:
1. Election of Directors
FOR all nominees WITHOLD
listed below (except AUTHORITY to vote
as marked to the for all nominees
contrary below) listed below
Morris Shwiff, Mark Kenner, Fred Kenner, Robert D. DeRosier
and Clifton R. Duke.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, write that nominee's name in the space
provided below.)
2. Ratification of the declaration of a 10% stock dividend
on the Company's common stock.
FOR AGAINST WITHHOLD
3. In their discretion, upon such other procedural matters
as may properly come before the meeting.
Please complete, sign and mail this proxy promptly in the
enclosed self-addressed envelope, which requires no postage if
mailed in the United States. IF NO SPECIFIC DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED "FOR" MATTERS NO. 1 AND 2.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and the Proxy Statement each dated
May 23, 1997.
Dated , 1997
Shareholder's Signature
Shareholder's Signature
NOTE: Please sign exactly as your name is
shown on the left. If stock stands in two
or more names, please have all sign. If
this Proxy is executed by a corporation,
it should be signed in the name of the
corporation by an officer thereunto duly
authorized. If this Proxy is to be signed
as attorney, executor, administrator,
trustee, guardian, or in any
representative capacity, the title of the
person signing should be given in full
and any necessary documentary evidence of
authority to sign this Proxy should be
presented.
DESCRIPTION OF BUSINESS.
General
Arrow-Magnolia International, Inc., a Texas corporation (the
"Company" or "Arrow-Magnolia"), was incorporated in the State of
Texas in 1937.
The Company's business consists primarily of the manufacture
and distribution of approximately 400 specialty chemical products
for use in cleaning and maintaining equipment and general
maintenance and sanitation. The Company's manufacturing operations
blend, to the Company's specifications and according to the
Company's procedures, a variety of chemicals to create the
Company's products. The Company packages products that it blends or
manufactures and, in addition, purchases products that have been
blended or manufactured and then packaged under the Company's
labels by third parties. The Company also distributes certain
nonchemical products, such as paper and other janitorial supplies,
related to its chemical products. The Company's products, including
its nonchemical products, are marketed throughout the United
States, Canada and other countries to a variety of consumers,
including customers in the aircraft industry, the construction
industry and the telecommunications industry, which collectively
accounted for approximately 40% of the Company's sales during 1996.
No single customer accounted for as much as 10% of its total net
sales during 1996 or 1995.
The products sold by the Company include aircraft coatings,
cleaners, corrosion preventatives, degreasers, and air fresheners;
construction chemicals such as release agents, concrete strippers,
safety solvents, custom lubricants and rust reconverters; and
telecommunication formulations such as refinishers, cable cleaners,
graffiti removers and fiber optic lubricants. Other sanitation and
maintenance products sold by the Company include soaps, deodorants,
germicides, insecticides, disinfectants and miscellaneous
janitorial supplies. Nonchemical products sold by the Company
include mops, brooms, paper products and poly liners. The
Company's products are designed and packaged for large-scale users
rather than individual household consumers.
The Company currently manufactures certain of its products in
order to give the Company greater control over its inventory in
terms of quality and availability of goods. Cost savings are also
effected through elimination of outside vendor overhead and profit
and through reductions in the cost of carrying finished goods
inventory versus raw materials. Currently the Company manufactures
approximately 60% of its products (measured by 1996 sales expressed
in dollars). The raw materials necessary for manufacture of the
Company's products and the finished products resold by the Company
are readily available from numerous sources and the Company is not
dependent on any particular supplier for these items.
The Company markets its products primarily through its own
sales persons and independent contractors and manufacturers'
representatives. In addition, the Company exhibits its products at
trade shows. The Company attends, on a regular basis, approximately
six trade shows annually. The Company has no material backlog of
orders for its products.
The Company does not incur any material costs in complying
with applicable environmental laws.
Competition
The business of the Company is highly competitive in all of
its phases. However, the industry in which the Company competes is
very fragmented and, although two companies are significantly
larger than other companies engaged in this industry, no single
firm or group of firms dominates the industry as a whole. Further,
the total sales volume of the Company's products constitutes only
a very small portion of the total available market.
<PAGE>
The principal methods of competition in the business of the
Company are sales personnel, price, quality and delivery
capability. The Company competes with numerous other companies,
both domestic and foreign, and with major chemical companies that
have many products that are substantially similar to those sold by
the Company. Due to the substantial similarity in available
products and technology, product differentiation and preference is
largely a function of the sales effort. Management therefore
believes that the Company is able to compete successfully whenever
it maintains aggressive sales personnel.
To the best knowledge of the Company's management, the Company
is the only distributor of several products which are specially
formulated to the Company's specifications for the particular
applications of the telecommunications industry. There is no
assurance, however, that other manufacturers will not enter the
market in the future.
Employees
As of December 31, 1996, the Company employed approximately
one hundred fifteen (115) full-time employees, including its
warehouse personnel and administrative, accounting, clerical and
sales personnel. None of the Company's employees are covered by
union contracts, and the Company considers its relationship with
its employees to be excellent.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
From April 1995 to April 1996, the Company's common stock was
included for quotation on the NASDAQ OTC Bulletin Board and since
April 1996, the common stock has traded on the NASDAQ SmallCap
Market tier of the NASDAQ Stock Market under the trading symbol
"ARWM". The following table sets forth the high and low sales
prices for the common stock for each month since such inclusion, as
adjusted to reflect a one-for-one stock dividend which became
effective on June 14, 1996:
Quarter Ended High Low
December 31, 1996 4 7/8 3 3/8
September 30, 1996 4 1/4 3 1/2
June 30, 1996 5 2 1/2
March 31, 1996 2 1/2 2 1/8
December 31, 1995 2 1/2 1 3/4
September 30, 1995 2 15/32 1 5/8
June 30, 1995 2 1 3/16
The approximate number of record holders of the Company's
Common Stock as of December 31, 1996, was 700.
The Company has paid no cash dividends with respect to its
Common Stock since 1988, when it paid a dividend of $0.05 per
share. The Company currently intends to retain any earnings for
use in its business and does not anticipate paying any cash
dividends in the foreseeable future.
PAGE
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following table sets forth for the periods indicated the
relative percentages which certain items included in the
consolidated statements of earnings bear to net sales and the
percentage changes of such items as compared to the indicated prior
period:
<TABLE>
Increase(Decrease)
From Prior Period
Years Ended
Percentage of Net Sales 1996 1995
Years Ended December 31 vs. vs.
1996 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 22.5% 25.5%
Cost of sales 57.5% 58.2% 58.6% 21.0% 24.7%
Gross profit 42.5% 41.8% 41.4% 24.4% 26.7%
General and
administra-
tive expenses 26.2% 28.3% 31.3% 13.5% 13.3%
Operating income 16.3% 13.5% 10.1% 47.1% 68.2%
Interest expense 0.8% 1.2% 1.5% (14.2)% (4.5)%
Earnings before
income taxes 16.0% 12.7% 8.8% 54.6% 88.1%
Net earnings 10.1% 8.1% 5.4% 53.5% 88.1%
</TABLE>
Comparison of Annual Results
Net sales for fiscal year 1996 increased by 22.5% from
$8,393,829 to $10,278,559 versus fiscal year 1995 after increasing
25.5% from fiscal 1994 to fiscal 1995. Cost of sales as a
percentage of net sales improved from 58.6% to 58.2% to 57.5% from
1994 through 1995 and 1996. The increase in sales from 1995 to
1996 is primarily attributable to the extension of sales coverage
through the addition of sales personnel under an ongoing hiring
program. As a result of increased sales combined with cost
control, gross profit increased by 24.4% from $3,508,030 to
$4,364,634 for fiscal 1996 versus fiscal 1995, after increasing by
26.7% from fiscal 1994 to fiscal 1995. For the fiscal year, the
gross profit margin reached a record 42.5% of net sales, as
compared to 41.8% for 1995 and 41.4% for 1994.
General and administrative expenses continued to fall as a
percentage of net sales from 31.3% in 1994 to 28.3% in 1995 and
26.2% in 1996 as sales volume improved at a more rapid pace than
the modest 13% increase in these expenses from year to year.
Interest expense fell as a percentage of net sales from 1.5%
to 1.2% to 0.8% from 1994 through 1996 due to application of funds
generated from continued profitability to reduce debt and reduction
in the interest rate paid to the prime rate.
<PAGE>
As a result of these factors, for the fiscal year ended
December 31, 1996, net income increased to $1,042,460 from
$679,074, or 53.5%, versus the same period in 1995. These results
compare favorably to net earnings for 1994 of $361,064.
Liquidity and Capital Resources
The Company's working capital (total current assets less total
current liabilities), which was $2,696,048 as of December 31, 1995,
improved during 1996 to $3,591,923 as of December 31, 1996. The
Company's current assets increased significantly as the Company's
cash and short-term investments, accounts receivable and
inventories increased due to increased sales and profitability.
Current liabilities also increased, but less dramatically, in
response to increased sales volumes.
As shown in the Company's consolidated statements of cash
flows, the Company generated $850,225 in cash flow from operations
as the Company continued to capitalize on its profitability,
partially offset by increases in receivables and inventories
resulting from its sustained growth. The Company realized $350,730
from investing activities as it liquidated certain short-term
investments. A total of $207,374 was used in financing activities
as the Company paid down its remaining debt.
Currently the Company is evaluating whether to construct an
additional 30,000 square feet of warehouse space to its existing
facilities. Based upon its initial review, the Company believes it
has more than adequate funds on hand to complete this addition if
the Company concludes that it is desirable. In addition, at
December 31, 1996, the Company had $600,000 available under a
revolving line of credit bearing interest at the lender's prime
rate (8.25% at December 31, 1996). The Company believes that its
present financing is also otherwise adequate for its capital needs
for the foreseeable future.
Accounting Standards
In June of 1996, the Financial Accounting Standards Board
(FASB) issued SFAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", which
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities.
Management of the Company does not believe SFAS 125 will have a
material impact on the Company's financial statement. The adoption
of SFAS 125 will be reflected in the Company's 1997 consolidated
financial statements.
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Arrow-Magnolia International, Inc.:
We have audited the accompanying consolidated balance sheets of
Arrow-Magnolia International, Inc. and subsidiary as of December
31, 1996 and 1995 and the related consolidated statements of
earnings, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Arrow-Magnolia International, Inc. and subsidiary as of
December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 11, 1997
PAGE
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
Assets 1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,755,000 761,419
Short-term investments 300,000 690,051
Trade accounts receivable,
less allowance for
doubtful accounts of $245,521
in 1996 and
$269,813 in 1995 (note 4) 1,585,552 1,339,408
Inventories (note 4) 769,977 681,825
Deferred income taxes (note 6) 83,170 91,430
Other assets 19,801 23,867
Total current assets 4,513,500 3,588,000
Property and equipment, net
(notes 2 and 5) 352,641 371,320
Intangible assets, net
(note 3) 96,011 110,560
Note receivable 40,000 40,000
Deferred income taxes (note 6) 19,602 24,811
Other assets 1,000 1,000
Total Assets $5,022,754 4,135,691
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of
long-term debt (note 5) $ 107,483 112,835
Accounts payable 413,836 421,283
Accrued liabilities 199,806 183,080
Income taxes payable 200,452 174,754
Total current liabilities 921,577 891,952
Note payable (note 4) 650,000 790,000
Long-term debt, excluding
current installments
(note 5) 122,362 250,844
Total liabilities 1,693,939 1,932,796
Stockholders' equity (note 7):
Preferred stock - par value $.10;
authorized 500,000
shares; none issued
- -
Common stock - par value $.10;
authorized 10,000,000 shares;
issued and outstanding 2,373,120
shares in 1996 and 2,315,200
shares in 1995 237,312 115,760
Additional paid-in capital 1,347,748 1,385,840
Retained earnings 1,743,755 701,295
Total stockholders' equity 3,328,815 2,202,895
$5,022,754 4,135,691
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Net sales $10,278,559 8,393,829 6,686,615
Cost of sales 5,913,925 4,885,799 3,917,320
Gross profit 4,364,634 3,508,030 2,769,295
General and administrative
expenses 2,692,320 2,371,447 2,093,582
Operating income 1,672,314 1,136,583 675,713
Other income (expenses):
Interest expense (82,841) (96,552) (101,051)
Gain on disposition of assets - 2,500 1,867
Interest income 42,992 17,150 9,267
Other income 17,158 7,016 -
Other expenses, net (22,691) (69,886) (89,917)
Earnings before income
taxes 1,649,623 1,066,697 585,796
Income taxes (note 6) 607,163 387,623 224,732
Net earnings $1,042,460 679,074 361,064
Earnings per common share (note 7):
Net earnings $ .37 . 25 .16
Weighted average shares
outstanding 2,836,404 2,671,289 2,200,000
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND
SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
<TABLE>
Retained
earnings Total
Additional (accumula stock
Common Stock paid-in ted holders
Shares Amount capital deficit equity
<S> <C> <C> <C> <C> <C>
Balances at December
31, 1993 (note 7) 2,000,000 $200,000 800,000 (38,843) 961,157
Net earnings - - - 361,064 361,064
Balances at
December 31, 1994 2,000,000 200,000 800,000 322,221 1,322,221
10% stock dividend 200,000 20,000 280,000 (300,000) -
Issuance of common 115,200 11,520 190,080 - 201,600
stock for cash
Net earnings - - - 679,074 679,074
Balances at December
31, 1995 2,315,200 231,520 1,270,080 701,295 2,202,895
(note 7)
Exercise of stock 7,920 792 3,168 - 3,960
options
Exercise of stock 50,000 5,000 57,500 - 62,500
warrants
Expense resulting
from issuance - - 17,000 - 17,000
of stock warrants
(note 7)
Net earnings - - - 1,042,460 1,037,460
Balances at
December 2,373,120 $237,312 1,347,748 1,743,755 3,323,815
31, 1996
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND
SUBSIDIARY
Consolidated Statements of Cash Flow
Years ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $1,042,460 679,074 361,064
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization 72,549 74,148 103,752
Gain on disposition of property and - (2,500)(1,867)
equipment
Deferred income taxes 13,469 (18,817) 3,167
Provision for doubtful accounts 236,632 193,838 187,871
Compensation expense from issuance 17,000 - -
of stock warrants
(Increase) decrease in operating assets:
Receivables (482,776) (663,583)(333,073)
Inventories (88,152) (71,212) (78,499)
Other assets 4,066 11,458 18,936
(Decrease) increase in operating liabilities:
Accounts payable (7,447) 126,476 18,064
Accrued liabilities 16,726 53,270 45,111
Income taxes payable 25,698 45,088 129,290
Net cash provided by
operating
activities 850,225 427,240 453,816
Cash flows from investing activities:
Proceeds from sale of short-term 990,051 - -
investments
Purchase of short-term
investments (600,000) (690,051) -
Acquisition of property and
equipment (39,321) (30,905) (27,295)
Proceeds from sale of property and
equipment - 2,500 26,428
Net cash provided by
(used in) 350,730 (718,456) (867)
investing activities
Cash flows from financing activities:
Proceeds from issuance of
note payable 34,487 200,000 703,838
Repayments of note payable (174,487) (100,000) (738,838)
Proceeds from issuance of
long-term - 25,448 495,000
debt
Repayments of long-term debt (133,834) (131,296) (552,997)
Repayments of capital lease
obligation - - (20,473)
Proceeds from issuance of
common stock 66,460 201,600 -
Net cash provided by
(used in) financing
activities (207,374) 195,752 (113,470)
Net increase (decrease)
increase in cash 993,581 (95,464) 339,479
and cash equivalents
Cash and cash equivalents
at beginning of year 761,419 856,883 517,404
Cash and cash equivalents
at end of year $1,755,000 761,419 856,883
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of
Arrow-Magnolia International, Inc. (Arrow) and its
wholly-owned subsidiary, Bio/Dyne Chemical Company (Bio/Dyne)
(collectively the Company). All significant intercompany
balances and transactions have been eliminated in
consolidation.
(b) Nature of the Operations and Use of Estimates
The Company is engaged in the sale and distribution of
chemical products, primarily industrial and institutional
cleaning and maintenance supplies and related products, to
industrial users, telephone supply distributors, governmental
agencies and school systems. The Company's customers
operate in many different industries and geographic
regions. No single customer accounted for more than 10% of
net sales in 1996, 1995 or 1994.
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(c) Cash Equivalents and Statements of Cash Flows
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents. There were no cash equivalents at December 31,
1995. Cash equivalents at December 31, 1996 consist of U.S.
treasury bills with original maturities of less than three
months.
Cash paid for interest during 1996, 1995 and 1994 was $82,841,
$96,552 and $101,051, respectively. Cash paid for federal
income taxes during 1996, 1995 and 1994 was $356,310, $204,000
and $65,024, respectively.
(d) Short-term Investments
Short-term investments, all of which are classified as held
to maturity at December 31, 1996 and 1995, represent
investments in bank certificates of deposit and U.S.
Government Treasury Bills. The investments are recorded at
amortized cost, which approximates market value.
(e) Inventories
Inventories, which consist primarily of merchandise purchased
for resale and raw materials purchased for blending, are
stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(continued)
<PAGE>
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets. The cost of maintenance and
repairs is charged to expense as incurred; significant
renewals and betterments are capitalized.
(g) Goodwill
Goodwill, which represents the excess of purchase price over
fair value of net assets acquired, is amortized on a
straight-line basis over the expected periods to be
benefited, generally 40 years. The Company assesses the
recoverability of this intangible asset by determining whether
the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating
cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted
future operating cash flows using a discount rate reflecting
the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
that will apply in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
(i) Earnings per Share
Earnings per share is computed based on the weighted average
number of common shares outstanding during each year (as
adjusted on a retroactive basis for the stock dividend and
stock split discussed in note 7 and the dilutive effect of
common stock equivalents in 1995) plus the dilutive effect of
outstanding common stock options and warrants considered
common stock equivalents. The difference between primary and
fully diluted earnings per share is not material.
(j) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, Accounting for Stock-Based
Compensation which permits entities to recognize as expense
over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option
grants made in 1996 and future years as if the
fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
(continued)
<PAGE> <PAGE>
(k) Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, on January 1, 1996. This Statement
requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed
the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this Statement did not
have a material impact on the Company's financial position,
results of operations, or liquidity.
(l) Fair Value of Financial Instruments
The Company defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in
a current transaction between willing parties. Financial
instruments included in the Company's financial statements
include cash and cash equivalents, short-term investments,
trade accounts receivable, other receivables, note receivable,
other assets, note payable and long-term debt. Unless
otherwise disclosed in the notes to the financial statements,
the carrying value of financial instruments is considered to
approximate fair value due to the short maturity and
characteristics of those instruments. The carrying value of
long-term debt approximates fair value as terms approximate
those currently available for similar debt instruments.
(2) Property and Equipment
Property and equipment consist of the following at December
31, 1996 and 1995:
Useful 1996 1995
lives
Land - $ 95,310 95,310
Buildings and improvements 5 to 40 years 415,591 415,591
Machinery and equipment 3 to 10 years 292,943 276,719
Furniture and fixtures 5 to 10 years 211,206 210,389
1,015,050 998,009
Less accumulated depreciation (662,409) (626,689)
$352,641 371,320
(continued)
PAGE
<PAGE>
(3) Intangible Assets
Intangible assets consist of the following at December 31,
1996 and 1995:
Useful 1996 1995
lives
Goodwill 40 years $110,500 110,500
Customer lists 5 years 17,500 17,500
Sales force 7 years 82,500 82,500
Other 8 years 10,500 10,500
221,000 221,000
Less accumulated amortization (124,989) (110,440)
$ 96,011 110,560
(4) Note Payable
The note payable at December 31, 1996 is a revolving line of
credit ($650,000 outstanding at December 31, 1996) with an
asset-based lender due on May 1, 1998. The credit agreement
provides for a commitment from the lender of the lesser of
$1,250,000 or the borrowing base as defined. At December 31,
1996, the unused portion of the commitment was $600,000. The
terms of the credit agreement require the Company to maintain
certain minimum financial criteria. The notes require
monthly payments of interest at the lender's prime rate (8.25%
at December 31, 1996) and is collateralized by certain
accounts receivable and inventories. As the line of credit
bears interest at market rates, the carrying amount of
borrowings outstanding at December 31, 1996 approximates fair
value.
(5) Long-term Debt
Long-term debt consists of the following at December 31, 1996
and 1995:
1996 1995
Note payable to a bank, interest at
prime (8.25% at December 31, 1996),
principal and interest of $8,250 payable
monthly, maturing in August 1999,
collateralized by the Company's office
and warehouse $215,000 335,000
Note payable to a bank in monthly
installments of $765, including interest
at 7.9%, maturing in July 1996, and
collateralized by an automobile - 5,352
Note payable to a bank in monthly
installments of $707, including interest
at 7.9%, maturing September 1998,
and collateralized by an automobile 14,845 23,327
229,845 363,679
Less current installments 107,483 112,835
$122,362 250,844
<PAGE>
(continued)<PAGE>
The aggregate maturities of long-term debt subsequent to
December 31, 1996 are as follows:
1997 $107,483
1998 105,362
1999 17,000
(6) Income Taxes
Income tax expense (benefit) for the years ended December 31,
1996, 1995 and 1994 consists of the following:
1996 1995 1994
U.S. federal - current $557,008 378,754 194,315
U.S. federal - deferred 13,649 (18,817) 3,167
State - current 36,686 27,686 27,250
$607,163 387,623 224,732
Income tax expense for the years ended December 31, 1996 1995
and 1994 differs from the "expected" tax expense (computed by
applying the 34% U.S. federal corporate rate to earnings
before income taxes) as follows:
1996 1995 1994
Computed "expected" tax expense $559,172 362,677 199,171
Amortization of goodwill 5,253 3,994 5,450
State income taxes,
net of federal benefit 24,213 18,273 7,985
Other 18,525 2,679 2,126
$607,163 387,623 224,732
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at December 31, 1996 and 1995 are presented
below:
1996 1995
Current deferred tax assets:
Allowance for doubtful accounts $83,477 91,737
Other (307) (307)
$81,170 91,430
Noncurrent deferred tax assets:
Property and equipment depreciation 22,557 24,811
Other (2,955) -
$19,602 24,811
Deferred tax assets and liabilities are computed by applying
the effective U.S. federal income tax rate to the gross
amounts of temporary differences and other tax attributes.
Deferred tax assets and liabilities relating to state income
taxes are not material. The Company expects the net deferred
tax assets at December 31, 1996 to be realized as a result of
future taxable income.
(continued)
PAGE
<PAGE>
(7) Stockholders' Equity
On June 14, 1996, the Company declared a 2 for 1 stock split
effected in the form of a stock dividend. As a result all
share and per share information in the accompanying
consolidated financial statements has been retroactively
restated to give effect to the split.
During 1994, the Company's Board of Directors approved a
nonqualified stock option plan (Plan) covering 440,000 shares
of common stock. Participants in the Plan are selected by the
Company's Board of Directors from the executive officers and
other key employees of the Company. The Plan provides that
the option price per share and vesting period for stock
options issued under the Plan are determined by the Company's
Board of Directors.
In December 1994, 440,000 stock options were granted to
certain officers of the Company at an option price of $.50
per share the estimated fair market value of the common stock
at the date of grant. These stock options were fully
exercisable at the date of grant.
In January 1995, the Plan was amended to provide for an
increase in the number of shares subject to the Plan to
550,000 shares and an additional 110,000 options were granted
to certain key employees. These stock options were issued at
an option price of $.50 per share, the estimated fair value of
the common stock at the date of grant, and vest in annual
increments of 20% with the first 20% vesting occurring on the
date of issuance. At December 31, 1996, 7,920 of the options
outstanding under the Plan had been exercised and 36,000 of
the 110,000 options were exercisable.
On May 15, 1995, the Company issued stock warrants to a
certain service provider. The stock warrants were exercisable
to purchase up to 50,000 shares of the Company's common stock
at $1.25 per share, the estimated fair market value of the
common stock at the date of grant. The stock warrants were
fully exercisable at the date of the grant. During 1996, all
of the warrants were exercised.
In May 1996, the Company issued stock warrants to an
additional service provider. The stock warrants are
exercisable to purchase up to 40,000 shares of the Company's
common stock at $2.25 per share. The Company is recognizing
the aggregate excess of the market price over the exercise
price at date of grant as expense over the two year term of
the warrants. The stock warrants were fully exercisable at
the date of the grant in 10,000 share increments. The stock
warrants expire two years from the date of issuance with new
warrants subject to issuance for any warrants not exercised
prior to the expiration date. At December 31, 1996, none of
the warrants had been exercised.
(8) Stock Options
The per share weighted-average fair value of stock options
granted during 1995 was $.249 on the date of grant using the
Black Scholes option-pricing model with the following
weighted-average assumptions: expected dividend yield 0.0%,
risk-free interest rate of 7.82%, and an expected life of 7
years. There were no stock options granted during 1996.
The Company applies APB Opinion No. 25 in accounting for its
Plan and, accordingly, has recognized no compensation expense
for stock options granted at exercise prices at least equal to
the market value of the Company's common stock. Had the
Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123,
the Company's net income would have been reduced to the pro
forma amounts indicated below:
(continued)
PAGE
<PAGE>
1996 1995
Net income:
As reported $1,042,460 679,074
Pro forma $1,036,982 668,118
Pro forma net income reflects only options granted in 1996 and
1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in
the pro forma net income amounts presented above because
compensation costs is reflected over the options vesting
period and compensation cost for options granted prior to
January 1, 1995 is not considered.
PAGE
<PAGE>
Board of Directors
Morris Shwiff Chairman of the Board and President
Arrow-Magnolia International, Inc.
Mark Kenner Executive Vice President
Arrow-Magnolia International, Inc.
Fred Kenner Vice President, Secretary and Treasurer
Arrow-Magnolia International, Inc.
Executive Officers
Morris Shwiff President
Mark Kenner Executive Vice President
Fred Kenner Vice President, Secretary and Treasurer
Registrar and Transfer Agent
Harris Trust and Savings Bank
77 Water Street, 4th Floor
New York, New York 10005
Auditors
KPMG Peat Marwick LLP
200 Crescent Court
Suite 300
Dallas, Texas 75201
Legal Counsel
Hewitt & Hewitt, P.C.
2612 Thomas Avenue
Dallas, Texas 75204
Corporate Headquarters
2646 Rodney Lane
Dallas, Texas 75229
Form 10-KSB Report
A copy of the Company's Annual Report
on Form 10-KSB will be made available to
interested shareholders upon request to
the Investor Relations Department,
2646 Rodney Lane
Dallas, Texas 75229
