SCOTTS LIQUID GOLD INC, 10-K, 1996-03-29

SCOTTS LIQUID GOLD INC
10-K, 1996-03-29
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION{PRIVATE }
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [ FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR

[ ] 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 0-5128
------

SCOTT'S LIQUID GOLD-INC.
---------------------------------------------------
(Exact name of Registrant as specified in its charter)

Colorado 84-0920811
--------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4880 Havana Street, Denver, CO 80239
--------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (303) 373-4860

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

$0.10 Par Value Common Stock
------------------------------------
(Title of Class)

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
--------- -----------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ( Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]

The aggregate market value of the Registrant's voting stock held as of March 11,
1996 by non-affiliates of the Registrant was $15,414,622. This calculation
assumes that certain parties may be affiliates of the Registrant and that
therefore, 5,605,317 shares of voting stock are held by non-affiliates.

As of March 11, 1996, the Registrant had 10,030,900 shares of its $0.10 par
value common stock outstanding.

Documents Incorporated by Reference

The Registrant's 1995 Annual Report to shareholders is incorporated by reference
in Parts I, II and IV. The Registrant's definitive Proxy Statement for the
Annual Meeting of shareholders to be held on May 1, 1996, is incorporated by
reference in Part III.

SCOTT'S LIQUID GOLD-INC.

ANNUAL REPORT ON

FORM 10-K

FOR YEAR ENDED DECEMBER 31, 1995

PART I
------

ITEM 1. BUSINESS.
- -------------------

Portions of the 1995 Annual Report to shareholders of Scott's Liquid
Gold-Inc. (the "Company" or "Registrant") are attached to this Report as Exhibit
13 and are called in this Report the "Annual Report". The information set forth
under the headings "Description of Business," "Products and Services," and
"Management Discussion and Analysis of Financial Condition and Results of
Operations" of the Annual Report hereby is incorporated by reference into this
Report.

ITEM 2. PROPERTIES.
- ---------------------

The information set forth under "Description of Business - Properties" and
"Management Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" of the Annual Report hereby is
incorporated by reference into this Report.

ITEM 3. LEGAL PROCEEDINGS.
- ----------------------------

The information set forth under "Description of Business - Legal
Proceedings" and "Management Discussion and Analysis of Financial Condition and
Results of Operations - Other" of the Annual Report hereby is incorporated by
reference into this Report. The lawsuit by the United States Department of
Justice at the request of the United States Army, as described therein, is
United States of America v. Scott's Liquid Gold-Inc., in the United States
- ----------------------------------------------------

District Court for the District of Colorado and was instituted on September 8,
1994.

The lawsuits against private label producers, as described in the Report,
are the following: Neoteric Cosmetics, Inc. v. Evron Industries, Inc., in the
--------------------------------------------------

United States District Court for the District of Colorado, which was instituted
on January 30, 1996; and Neoteric Cosmetics, Inc. v. Perrigo Co. and Cumberland-
-------------------------------------------------------

Swan, Inc., in the United States District Court for the District of
- ----------

Massachusetts, which was instituted on July 18, 1995.

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

Not applicable.

PART II
- -------

ITEM 5, MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- --------------------------------------------------------------------------------

The information set forth under "Corporate Data" and "Market Information"
of the Annual Report hereby is incorporated by reference into this Report.

As of March 11, 1996, the Company had approximately 1,400 shareholders of
record.

The high and low prices of Scott's Liquid Gold-Inc. common stock as traded
on the New York Stock Exchange for the 1995 year were as follows:

<TABLE>
Three Months Ended 1995

High Low
<S> <C> <C>

March 31 6 5-1/8
June 30 5-5/8 3-3/4
September 30 4-3/4 3-1/4
December 31 3-5/8 2-1/2
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA.
- ----------------------------------

The information set forth under "Selected Financial Data" of the Annual
Report hereby is incorporated by reference into this Report.

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

RESULTS OF OPERATIONS.

The information set forth under "Management Discussion and Analysis of
Financial Condition and Results of Operations" of the Annual Report hereby is
incorporated by reference into this Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- --------
The information set forth under "Consolidated Financial Statements," "Notes
to Consolidated Financial Statements," "Report of Independent Public
Accountants" and "Selected Financial Data - Selected Quarterly Financial Data"
of the Annual Report hereby is incorporated by reference into this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------

FINANCIAL DISCLOSURE.
- ---------------------

Not applicable.

PART III
- --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------------------------------------------------------------

ITEM 11. EXECUTIVE COMPENSATION.
- ---------------------------------

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ---------------------------------------------------------

For Part III, the information set forth in the Company's definitive Proxy
Statement for the Company's Annual Meeting of Shareholders to be held on May 1,
1996, hereby is incorporated by reference into this Report.

PART IV
- -------

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

(a)(1) Financial Statements:

Consolidated Statements of Income -
Years ended December 31, 1995, 1994 and 1993

Consolidated Balance Sheets -
December 31, 1995 and 1994

Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994 and 1993

Consolidated Statements of Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993

Notes to Consolidated Financial Statements

Report of Independent Public Accountants

(2) Financial Statement Schedules:

II - Valuation and Qualifying Accounts -
Years ended December 31, 1995, 1994 and 1993

Inasmuch as Registrant is primarily a holding company and all subsidiaries
are wholly-owned, only consolidated statements are being filed. Schedules
other than those listed above are omitted because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or notes to the financial statements.

(b) Reports on Form 8-K:

Not applicable.

DOCUMENT
--------
EXHIBIT
NO.
- -------

10.5* Indemnification Agreements dated May 6, 1987 between
the Registrant and Jerome J. Goldstein, Mark E.
Goldstein, Carolyn J. Anderson, and Barry Shepard,
incorporated by reference to Exhibit 10.5 of Annual
Report on Amended Form 10-K for the year ended
December 31, 1993. An Indemnification Agreement dated
October 4, 1990 between the Registrant and Michael J.
Sheets, incorporated by reference to Exhibit 10.5 of
Annual Report on Form 10-K for the year ended December
31, 1990. An Indemnification Agreement dated December
23, 1991 between the Registrant and Dennis H. Field,
and two separate Indemnification Agreements dated
January 17, 1992 between the Registrant and Michael J.
Sheets and Dennis H. Field, incorporated by reference
to Exhibit 10.5 of Annual Report on Form 10-K for the
year ended December 31, 1992. Indemnification
Agreement dated February 23, 1993 between the
Registrant and James F. Keane, incorporated by
reference to Exhibit 10.5 of Quarterly Report on Form
10-Q for the three months ended March 31, 1993.
10.6* Scott's Liquid Gold-Inc. Employee Stock Ownership Plan
and Trust Agreement, effective January 1, 1989, and
First and Second Amendments thereto, incorporated by
reference to Exhibit 10.6 of Annual Report on Form 10-
K for the year ended December 31, 1994.
10.7* 1986 Incentive Stock Option Plan and First Amendment
thereto, incorporated by reference to Exhibit 4.4 of
the Company's Registration Statement No. 33-63254 on
Form S-8, filed with the Commission on May 25, 1993.
10.8* Scott's Liquid Gold-Inc. 1993 Stock Option Plan for
Outside Directors, incorporated by reference to
Exhibit 4.7 of the Company's Registration Statement
No. 33-63254 on Form S-8, filed with the Commission on
May 25, 1993.
10.9 Compliance Order on Consent, executed by the Colorado
Department of Health on March 5, 1990, originally
filed with the Commission on Form 10-K for the year
ended December 31, 1989, and incorporated by reference
to Exhibit 10.9 of Annual Report on Form 10-K for the
year ended December 31, 1994.
13 Portions of 1995 Annual Report to Security Holders.
21 List of Subsidiaries, incorporated by reference to
Exhibit 21 of Annual Report on Form 10-K for the year
ended December 31, 1994.
23 Consent of Arthur Andersen LLP.
24 Powers of Attorney.
27 Financial Data Schedule.

*Management contract or compensatory plan or arrangement

<TABLE>
<CAPTION>
Valuation and
Qualifying
Accounts

Schedule II

Column A Column B Column C Column D Column E

Additions

Balance 1 2
at Charge Balance
Description Beginning to Charges at
of Costs and to other End of
Period Expenses Accounts Deductions Period
<S> <C> <S> <C> <S> <C>

Year Ended
December 31, 1995
Allowance for
doubtful accounts $345,900 $229,000 $73,800 (1) $501,100

Year Ended
December 31, 1994
Allowance for
doubtful accounts $184,800 $174,400 $13,300 (1) $345,900

Year Ended
December 31, 1993
Allowance for
doubtful accounts $150,200 $44,900 $10,300 (1) $184,800

</TABLE>
<F1>
(1) Uncollectible accounts written off, net of recoveries.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and
Shareholders of Scott's Liquid Gold-Inc.:

We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of Scott's Liquid Gold-
Inc. and subsidiaries' annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
January 15, 1996. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in
the index of financial statements is the responsibility of the company's
management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.

/s/ Arthur Andersen LLP

Denver, Colorado
January 15, 1996

SIGNATURES

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

Date: March 28, 1996.

SCOTT'S LIQUID GOLD-INC.
a Colorado corporation

By: /s/ Barry Shepard
---------------------------------------
Barry Shepard, as an Attorney-in-Fact
for Mark E. Goldstein, President
Principal Executive Officer

By: /s/ Barry Shepard
---------------------------------------
Barry Shepard, Treasurer
Principal Financial Officer

By: /s/ Jeffry B. Johnson
---------------------------------------
Jeffry B. Johnson, Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons of the Registrant and in
the capacities and on the dates indicated:

Date Name and Title Signature
- ---- -------------- ---------

March 28, 1996 Carolyn J. Anderson, )
Director )
)
March 28, 1996 Mark E. Goldstein, )
Director )
)
March 28, 1996 Jerome J. Goldstein, ) /s/ Barry Shepard
Director ) -------------------------
) Barry Shepard, for
) himself and as Attorney-
) in-Fact for the named
) directors who
March 28, 1996 Dennis H. Field, ) together constitute all of
Director ) the members of
) Registrant's Board of
) Directors
March 28, 1996 Michael J. Sheets, )
Director )

EXHIBIT INDEX
-------------

EXHIBIT DOCUMENT
NO. --------
- ----

3.1 Articles of Incorporation, as amended and restated
through May 4, 1988, incorporated by reference to
Exhibit 3.1 of Annual Report on Amended Form 10-K
for the year ended December 31, 1993.
3.2 Bylaws, as amended through February 27, 1996.
4.1 Indenture of Trust (including form of First
Mortgage Bond Due 2001) dated July 1, 1994 between
Registrant and Norwest Bank Colorado, N.A. as
Trustee, incorporated by reference to Exhibit 4.1
of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1994.
4.2 Combination Deed of Trust, Security Agreement and
Fixture Financing Statement, dated July 29, 1994,
between the Company, as Grantor, the Public Trustee
for the City and County of Denver, Colorado, and
Norwest Bank Colorado, N.A. as Beneficiary,
incorporated by reference to Exhibit 4.2 of the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1994.
10.1* Scott's Liquid Gold-Inc. Fourth Amended Health and
Accident Plan effective January 1, 1995,
incorporated by reference to Exhibit 10.1 of Annual
Report on Form 10-K for the year ended December 31,
1994.
10.2* Amended Key Executive Disability Plan--Scott's
Liquid Gold-Inc., incorporated by reference to
Exhibit 10.2 of Annual Report on Form 10-K for the
year ended December 31, 1992.
10.3* Scott's Liquid Gold-Inc. Restricted Stock Plan
effective July 22, 1987, incorporated by reference
to Exhibit 10.3 of Annual Report on Amended Form
10-K for the year ended December 31, 1993.
10.4* 1996 Key Executive Bonus Plan.
10.5* Indemnification Agreements dated May 6, 1987
between the Registrant and Jerome J. Goldstein,
Mark E. Goldstein, Carolyn J. Anderson, and Barry
Shepard, incorporated by reference to Exhibit 10.5
of Annual Report on Amended Form 10-K for the year
ended December 31, 1993. An Indemnification
Agreement dated October 4, 1990 between the
Registrant and Michael J. Sheets, incorporated by
reference to Exhibit 10.5 of Annual Report on Form
10-K for the year ended December 31, 1990. An
Indemnification Agreement dated December 23, 1991
between the Registrant and Dennis H. Field, and two
separate Indemnification Agreements dated January
17, 1992 between the Registrant and Michael J.
Sheets and Dennis H. Field, incorporated by
reference to Exhibit 10.5 of Annual Report on Form
10-K for the year ended December 31, 1992.
Indemnification Agreement dated February 23, 1993
between the Registrant and James F. Keane,
incorporated by reference to Exhibit 10.5 of
Quarterly Report on Form 10-Q for the three months
ended March 31, 1993.
10.6* Scott's Liquid Gold-Inc. Employee Stock Ownership
Plan and Trust Agreement, effective January 1,
1989, and First and Second Amendments thereto,
incorporated by reference to Exhibit 10.6 of Annual
Report on Form 10-K for the year ended December 31,
1994.
10.7* 1986 Incentive Stock Option Plan and First
Amendment thereto, incorporated by reference to
Exhibit 4.4 of the Company's Registration Statement
No. 33-63254 on Form S-8, filed with the Commission
on May 25, 1993.
10.8* Scott's Liquid Gold-Inc. 1993 Stock Option Plan for
Outside Directors, incorporated by reference to
Exhibit 4.7 of the Company's Registration Statement
No. 33-63254 on Form S-8, filed with the Commission
on May 25, 1993.
10.9 Compliance Order on Consent, executed by the
Colorado Department of Health on March 5, 1990,
originally filed with the Commission on Form 10-K
for the year ended December 31, 1989, and
incorporated by reference to Exhibit 10.10 of
Annual Report on Form 10-K for the year ended
December 31, 1994.
13 Portions of 1995 Annual Report to Security Holders.
21 List of Subsidiaries, incorporated by reference to
Exhibit 21 of Annual Report on Form 10-K for the
year ended December 31, 1994.
23 Consent of Arthur Andersen LLP.
24 Powers of Attorney.
27 Financial Data Schedule

*Management contract or compensatory plan or arrangement

BYLAWS{PRIVATE }

SCOTT'S LIQUID GOLD-INC.

(A COLORADO CORPORATION)

EFFECTIVE AS OF FEBRUARY 27, 1996

2/15/96

EXHIBIT B
TO
RESOLUTIONS OF BOARD OF DIRECTORS
DATED FEBRUARY 27, 1996

BYLAWS

SCOTT'S LIQUID GOLD-INC.

(A COLORADO CORPORATION)

EFFECTIVE AS OF FEBRUARY 27, 1996

BYLAWS
------

OF
--

SCOTT'S LIQUID GOLD-INC.
------------------------

TABLE OF CONTENTS
-----------------

Page
----

ARTICLE I -Offices ........................................... 1
1. Business Offices .................................. 1
2. Principal Office .................................. 1
3. Registered Office ................................. 1

ARTICLE II -...............................Shareholders' Meetings 1
1. Annual Meetings ................................... 1
2. Special Meetings .................................. 2
3. Place of Special Meetings ......................... 2
4. Notice of Meetings ................................ 3
5. Shareholders' List ................................ 4
6. Organization ...................................... 4
7. Agenda and Procedure .............................. 5
8. Quorum ............................................ 5
9. Adjournment ....................................... 5
10. Voting ............................................ 6
11. Inspectors ........................................ 7
12. Meeting by Telecommunication ...................... 8

ARTICLE III -..................................Board of Directors 8
1. Authority, Election and Tenure .................... 8

2. Number and Qualification .......................... 9
3. Regular Meetings .................................. 9
4. Special Meetings .................................. 9
5. Place of Meetings ................................. 9
6. Notice of Meetings ................................ 9
7. Quorum and Voting ................................. 10
8. Organization, Agenda and Procedure ................ 10
9. Resignation ....................................... 11
10. Removal ........................................... 11
11. Vacancies ......................................... 11
12. Executive and Other Committees .................... 12
13. Compensation of Directors ......................... 13
14. Meeting by Telecommunication ...................... 14

ARTICLE IV - Waiver of Notice by Shareholders and Directors and Action
of Shareholders and Directors by Consent .......... 14
1. Waiver of Notice .................................. 14
2. Action Without a Meeting .......................... 15

ARTICLE V -Officers .......................................... 16
1. Election and Tenure ............................... 16
2. Resignation, Removal and Vacancies ................ 16
4. President ......................................... 17
5. Vice Presidents ................................... 18
6. Secretary ......................................... 18
7. Treasurer ......................................... 19

8. Assistant Secretaries and Assistant Treasurers .... 19
9. Bond of Officers .................................. 19
10. Compensation ...................................... 20

ARTICLE VI - Indemnification.................................. 20
1. Indemnification ................................... 20
2. Provisions Not Exclusive .......................... 21
3. Effect of Modification ............................ 21
4. Definitions ....................................... 21
5. Insurance ......................................... 22
6. Expenses as a Witness ............................. 23
7. Notice to Shareholders ............................ 23

ARTICLE VII -Execution of Instruments; Loans; Checks and Endorsements;
Deposits; Proxies ................................. 24
1. Execution of Instruments .......................... 24
2. Borrowing ......................................... 24
3. Loans to Directors, Officers and Employees ........ 24
4. Checks and Endorsements ........................... 25
5. Deposits .......................................... 25
6. Proxies ........................................... 25

ARTICLE VIII - Shares of Stock................................ 26
1. Certificates of Stock ............................. 26
2. Shares Without Certificates ....................... 26
3. Record ............................................ 27

4. Transfer of Stock ................................. 27
5. Transfer Agents and Registrars; Regulations ....... 27
6. Lost, Destroyed or Mutilated Certificates ......... 28

ARTICLE IX - Corporate Seal................................... 28

ARTICLE X -Fiscal Year ....................................... 28

ARTICLE XI - Corporate Records................................ 29
1. Corporate Records ................................. 29
2. Addresses of Shareholders ......................... 29
3. Fixing Record Date ................................ 29
4. Inspection of Corporate Records ................... 30
5. Distribution of Financial Statements .............. 30
6. Audits of Books and Accounts ...................... 30

ARTICLE XII - Emergency Bylaws................................ 30

ARTICLE XIII - Amendments..................................... 31

BYLAWS
------

OF
--

SCOTT'S LIQUID GOLD-INC.
------------------------

(a Colorado Corporation)

ARTICLE I{PRIVATE }
-----------

Offices
--------

1.{PRIVATE } Business Offices

Corporation may have one or more offices at such place or places within or
without the State of Colorado as the Board of Directors may from time to time
determine or as the business of the Corporation may require.

2.{PRIVATE } Principal Office

The initial principal office of the Corporation shall be as set forth in the
Articles of Incorporation. The Board of Directors, from time to time, may
change the principal office of the Corporation.

3.{PRIVATE } Registered Office

The registered office of the Corporation shall be as set forth in the Articles
of Incorporation, unless changed as provided by the provisions of the Colorado
Business Corporation Act, as it may be amended from time to time, or any
successor law (the "Act").

ARTICLE II{PRIVATE }
--------------------

Shareholders' Meeting
---------------------

{PRIVATE }1. Annual Meetings

The annual meetings of shareholders for the election of directors to succeed
those directors whose terms expire and for the transaction of such other
business as may come before the meeting shall be held each year at such date,
time and place, either within or without the State of Colorado, as may be
designated by resolution of the Board of Directors from time to time; provided,
however, that an annual meeting shareholders shall be held each year on a date
that is within the earlier of six months after the close of the last fiscal year
or fifteen months after the last annual meeting. If the day so fixed for such
annual meeting shall be a legal holiday at the place of the meeting, then such
meeting shall be held on the next succeeding business day at the same hour.

{PRIVATE }2. Special Meetings

Special meetings of shareholders for any purpose or purposes, unless otherwise
prescribed by statute or by the Articles of Incorporation, may be called at any
time by the President or by the Board of Directors and shall be called by the
President or the Secretary upon one or more written demands (which shall
state the purpose or purposes therefor) signed and dated by the holders of
shares representing not less than ten percent of all votes entitled to be cast
on any issue proposed to be considered at the meeting. The record date for
determining the shareholders entitled to demand a special meeting is the date
of the earliest of any of the demands pursuant to which the meeting is called,
or the date that is 60 days before the date on which the first of such demands
is received, whichever is later. Business transacted at any special meeting of
shareholders shall be limited to the purpose or purposes stated in the notice of
such meeting.

3.{PRIVATE } Place of Special Meetings

Special meetings of shareholders shall be held at such place or
places, within or without the State of Colorado, as may be determined by the
Board of Directors and designated in the notice of the meeting, or, if no place
is so determined and designated in the notice, special meetings of shareholders
shall be held at the principal office of the Corporation.

4.{PRIVATE } Notice of Meetings

Not less than 10 nor more than 60 days prior to each annual or special meeting
of shareholders, written notice of the date, time and place of each annual and
special shareholders' meeting shall be given to each shareholder entitled to
vote at such meeting; provided, however, that if the authorized shares of the
Corporation are proposed to be increased, at least 30 days' notice in like
manner shall be given; and provided, further, that if the Act prescribes notice
requirements for particular circumstances (as in the case of the sale, lease or
exchange of the Corporation's assets other than in the usual and regular course
of business, or the merger or dissolution of the Corporation), the provisions of
the Act shall govern. Notice may be given in person; by telephone, telegraph,
teletype, electronically transmitted facsimile, or other form of wire or
wireless communication; and, if so given, shall be effective when received by
the shareholder. Notice may also be given by deposit in the United States mail,
postage prepaid, if addressed to the shareholder at the address of such
shareholder shown in the Corporation's current record of shareholders, and, of
so given, shall be effective when mailed. If three successive notices mailed to
any shareholder in accordance with the provisions of this Section 4 are returned
as undeliverable, no further notices to such shareholder shall be necessary
until another address for such shareholder is made known to the Corporation.
The notice of a special meeting shall, in addition, state the meeting's
purposes.

5.{PRIVATE } Shareholders' List

A complete record of the shareholders entitled to notice of any shareholders'
meeting (or an adjourned meeting described in Section 9 of this Article II)
shall be prepared by the Secretary of the Corporation. Such shareholders' list
shall be arranged by voting groups and, within each voting group by class or
series of shares, shall be alphabetical within each class or series and shall
show the address of, and the number of shares of each such class and series that
are held by, each shareholder. (When used in these Bylaws, the term "voting
group" or "voting groups" shall have the meaning assigned by the Act.) The
shareholders' list shall be available for inspection by any shareholder
beginning on the earlier of ten days before the meeting for which the list was
prepared or two business days after notice is given and continuing through the
meeting and any adjournment thereof at the Corporation's principal office or at
a place identified in the notice of the meeting in the city where the meeting
will be held. A shareholder or his agent or attorney is entitled on written
demand to inspect and, subject to the requirements of the Act, to copy the list
during regular business hours and during the period it is available for
inspection.

6.{PRIVATE }Organization
The President or, in the President's absence, the Chairman of the Board, or,
in the absence of both these persons, any Vice President shall call meetings of
shareholders to order and act as chairperson of such meetings. In the absence
of said officers, any shareholder entitled to vote at the meeting, or any proxy
of any such shareholder, may call the meeting to order and a chairperson shall
be elected by a majority of the votes present and entitled to be cast at the
meeting. The Secretary or any Assistant Secretary of the Corporation or any
person appointed by the chairperson may act as secretary of such meetings.

7.{PRIVATE } Agenda and Procedure

The Board of Directors shall have the responsibility of establishing an agenda
for each meeting of shareholders, subject to the rights of shareholders to raise
matters, if any, which may properly be brought before the meeting although not
included within the agenda. The chairperson shall be charged with the orderly
conduct of all meetings of shareholders and may impose rules or procedures for
this purpose.

8.{PRIVATE } Quorum

Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless otherwise provided in the Act or in the Corporation's
Articles of Incorporation, a majority of the votes entitled to be cast on a
matter by a voting group constitutes a quorum of that voting group for action
on that matter. In the absence of a quorum at any shareholders' meeting, a
majority of the votes present in person or represented by proxy and entitled
to vote on any matter at the meeting may adjourn the meeting from time to time
for a period not to exceed 120 days from the original date of the meeting
without further notice (except as provided in Section 9 of this Article II)
until a quorum shall be present or represented.

9.{PRIVATE } Adjournment
When a meeting is for any reason adjourned to another date, time or place,
notice need not be given of the adjourned meeting if the date, time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than 120
days from the date of the original meeting, or if, after the adjournment, a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder as of the new record date.

10.{PRIVATE } Voting

(a) Except as provided by law or in the Articles of Incorporation, at
every meeting of shareholders, or with respect to corporate action which may be
taken without a meeting, each outstanding share having voting power is entitled
to one vote, and each fractional share, if any is outstanding, is entitled to a
corresponding fractional vote, on each matter voted on at a shareholders'
meeting.
(b) A shareholder may vote the shareholder's shares in person or by
proxy. A shareholder may appoint a proxy by signing an appointment form, either
personally or by the shareholder's attorney-in-fact. A shareholder may appoint
a proxy by transmitting or authorizing the transmission of a telegram, teletype
or other electronic transmission providing a written statement of the
appointment to the proxy, to a proxy solicitor, proxy support service
organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the Corporation; except that the
transmitted appointment shall set forth or be transmitted with written evidence
from which it can be determined that the shareholder transmitted or authorized
the transmission of the appointment. An appointment of a proxy is not effective
against the Corporation until the appointment is received by the Corporation.
The appointment is effective for eleven months unless a different period is
expressly provided in the appointment form. An appointment of a proxy shall be
revocable by the shareholder except as may be permitted or provided by law.

(c) When a quorum is present at any meeting of shareholders, action
on a matter, other than the election of directors, by a voting group is approved
if the votes cast within the voting group favoring the action exceed the votes
cast within the voting group opposing the action, unless the matter is one upon
which a different vote is required by express provision of a statute, or the
Articles of Incorporation, or these Bylaws, in which case such express provision
shall govern and control the decision on such matter.

11.{PRIVATE } Inspectors

The chairperson of the meeting may at any time appoint two or more inspectors
to serve at a meeting of the shareholders. Such inspectors shall decide upon
the qualifications of voters, including the validity of proxies, accept and
count the votes for and against the matters presented, report the results of
such votes, and subscribe and deliver to the secretary of the meeting a
certificate stating the number of shares of stock within each voting group that
is issued and outstanding and entitled to vote thereon and the number of shares
within each voting group that voted for and against the matters presented. The
voting inspectors need not be shareholders of the Corporation, and any director
or officer of the Corporation may be an inspector on any matter other than a
vote for or against such director's or officer's election to any position with
the Corporation or on any other matter in which such officer or director may be
directly interested.

12.{PRIVATE } Meeting by Telecommunication
If and only if permitted by the Board of Directors, any or
all of the shareholders may participate in an annual or special shareholders'
meeting by, or the meeting may be conducted through the use of, any means of
communication by which all persons participating in the meeting may hear each
other during the meeting. If the Board of Directors determines to allow
shareholders to participate in a shareholders' meeting by telecommunication, the
Board shall establish the terms and conditions under which shareholders may
participate by such means and shall cause the notice of the meeting to contain
such terms and conditions. Only shareholders who comply with the terms and
conditions indicated in such notice shall be entitled to so participate by
telecommunication in the shareholders' meeting. A shareholder participating in
a meeting by telecommunication in compliance with the terms and conditions
established by the Board of Directors is deemed to be present in person at the
meeting.

ARTICLE III{PRIVATE }
--------------------

Board of Directors
-------------------

1.{PRIVATE } Authority, Election and Tenure

All corporate power shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
by, a Board of Directors. The Board of Directors shall be elected at each
annual meeting of shareholders. In an election of directors, that number of
candidates equaling the number of directors to be elected having the highest
number of votes cast in favor of their election shall be elected to the Board of
Directors.

2.{PRIVATE } Number and Qualification

In accordance with the Corporation's Articles of
Incorporation, the number of directors shall be at least three and not more than
nine. Within that range, the number of directors shall be as stated by
resolution of the Board of Directors from time to time (which latest enacted
resolution shall be deemed a part of these Bylaws and is incorporated herein by
reference), but no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Directors must be natural
persons at least eighteen years of age but need not be shareholders or residents
of the State of Colorado.

3.{PRIVATE } Regular Meetings

Regular meetings of the Board of Directors shall be held at such dates, times
and places as may be determined by the Board of Directors. Regular meetings of
the Board of Directors may be held without notice of the date, time, place or
purpose of the meeting.

4.{PRIVATE } Special Meetings

Special meetings of the Board of Directors may be called by the President at
any time and shall be called by the President or the Secretary on the written
request of any two directors.

5.{PRIVATE } Place of Meetings

Any meeting of the Board of Directors may be held at such place or places
either within or without the State of Colorado as shall from time to time be
determined by the Board of Directors and as shall be designated in the
resolution of the Board of Directors fixing the date, time and place of the
regular meetings of the Board of Directors or in the notice of special meeting.

6.{PRIVATE } Notice of Meetings

Notice of the date, time and place of each special meeting of directors shall
be given to each director at least two days prior to such meeting. The notice
of a special meeting of the Board of Directors need not state the purposes of
the meeting. Notice to each director of any special meeting may be given in
person; by telephone, telegraph, teletype, electronically transmitted
facsimile, or other form of wire or wireless communication; or by mail or
private carrier. Oral notice to a director of any special meeting is effective
when communicated. Written notice to a director of any special meeting,
including without limitation notice sent by electronic mail, is effective at
the earliest of: (a) the date received; (b) five days after it is deposited in
the United States mail, properly addressed to the last address for the director
shown on the records of the Corporation, first class postage prepaid; (c) the
date shown on the return receipt if mailed by registered or certified mail,
return receipt requested, postage prepaid, in the United States mail and if
the return receipt is signed by or on behalf of the director to whom the notice
is addressed.

7.{PRIVATE } Quorum and Voting

A majority of the number of directors fixed by or in accordance with Section
2 of this Article III shall constitute a quorum at all meetings of the Board of
Directors. The vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, except as
otherwise required by the Act.

8.{PRIVATE } Organization, Agenda and Procedure

The Chairman of the Board or, in the absence of the Chairman of the Board,
the President shall act as chairperson of the meetings of the Board of
Directors. The Secretary, any Assistant Secretary, or any other person
appointed by the chairperson shall act as secretary of each meeting of the
Board of Directors. The agenda of and procedure for such meetings shall be
as determined by the Board of Directors.

9.{PRIVATE } Resignation

Any director of the Corporation may resign at any time by giving written
resignation notice to the Corporation or the Secretary of the Corporation at
the Corporation's principal office. Such resignation shall take effect at
the date of receipt of such notice or at any later time specified therein and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective, unless it so provides. A director who
resigns may, but is not required to, deliver to the Secretary of State for
filing a statement to that effect.

10.{PRIVATE } Removal

Any director may be removed, either with or without cause, at any time, at a
special meeting of the shareholders called and held for such purpose if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal; provided, however, that if a director is elected by a voting
group of shareholders, only the shareholders of that voting group may
participate in the vote to remove that director. A vacancy in the Board of
Directors caused by any such removal may be filled by the Corporation's
shareholders at such meeting or, if the shareholders at such meeting shall
fail to fill such vacancy, by the Board of Directors as provided in Section
11 of this Article III.

11.{PRIVATE } Vacancies

If a vacancy occurs on the Board of Directors, including a vacancy
resulting from an increase in the number of directors: (a) the shareholders
may fill the vacancy at the next annual meeting or at a special meeting
called for that purpose; or (b) the Board of Directors may fill the vacancy;
or (c) if the directors remaining in office constitute fewer than a quorum of
the Board of Directors, they may fill the vacancy by the affirmative vote of
a majority of all the directors remaining in office. The term of a director
elected to fill a vacancy pursuant to subparagraph (b) or (c) of the foregoing
sentence expires at the next annual shareholders' meeting. The term of a
director elected to fill a vacancy pursuant to subparagraph (a) of this
Section 11 shall be the unexpired term of such director's predecessor in
office; except that, if the director's predecessor had been elected to fill
a vacancy pursuant to Subparagraph (b) or (c) of this Section 11, the term
of a director elected pursuant to Section (a) of this Section 11 shall be the
unexpired term of the last predecessor elected by the shareholders. If the
vacant directorship was held by a director elected by a voting group of
shareholders and one or more of the remaining directors were elected by the
same voting group, only such directors are entitled to vote to fill the
vacancy if it is filled by directors, and they may do so by the affirmative
vote of a majority of such directors remaining in office; and only the
holders of shares of that voting group are entitled to vote to fill such
vacancy if it is filled by the shareholders.

12.{PRIVATE } Executive and Other Committees

Except as otherwise required by the Act, the Board of Directors, by
resolution adopted by the greater of a majority of the number of
directors fixed by or in accordance with Section 2 of this Article III or the
number of directors required to take action pursuant to Section 7 of this
Article III, may designate from among its members an executive committee and one
or more other committees each of which, to the extent provided in the resolution
and except as otherwise prescribed by the Act, shall have and may exercise all
of the authority of the Board of Directors in the management of the Corporation,
except that no committee shall: (a) authorize distributions; (b) approve or
propose to shareholders action that the Act requires to be approved by
shareholders; (c) fill vacancies on the Board of Directors or on any of its
committees; (d) amend the Articles of Incorporation; (e) adopt, amend, or repeal
these Bylaws; (f) approve a plan of merger not requiring shareholder approval;
(g) authorize or approve reacquisition of shares, except according to a formula
or method prescribed by the Board of Directors; or (h) authorize or approve the
issuance or sale of shares, or a contract for the sale of shares, or determine
the designation and relative rights, preferences, and limitations of a class or
series of shares, except that with respect to this clause (h) the Board of
Directors may authorize a committee to do so within limits specifically
prescribed by the Board of Directors. The provision of these Bylaws governing
meetings, action without meeting, notice, waiver of notice, and quorum and
voting requirements of the Board of Directors shall apply to committees and the
members thereof.

13.{PRIVATE } Compensation of Directors

Each director may be paid such compensation as fixed from time to
time by resolution of the Board of Directors, together with reimbursement for
the reasonable and necessary expenses incurred by such director in connection
with the performance of such director's duties. Nothing herein contained shall
be construed to preclude any director from serving the Corporation in any other
capacity or any of its subsidiaries in any other capacity and receiving proper
compensation therefor.

14.{PRIVATE } Meeting by Telecommunication

One or more members of the Board of Directors or any
committee designated by the Board of Directors may hold or participate in a
meeting of the Board of Directors or such committee through the use of any means
of communication by which all persons participating can hear each other at the
same time.

ARTICLE IV{PRIVATE }
---------------------

Waiver of Notice by Shareholders and Directors and Action
---------------------------------------------------------
of Shareholders and Directors by Consent
----------------------------------------

1.{PRIVATE } Waiver of Notice

A shareholder may waive any notice required by the Act or by the Articles of
Incorporation or these Bylaws, and a director may waive any notice of a
directors' meeting, whether before or after the date or time stated in the
notice as the date or time when any action will occur or has occurred. The
waiver shall be in writing, be signed by the shareholder or director entitled to
the notice, and be delivered to the Corporation for inclusion in the minutes or
filing with the corporate records, but such delivery and filing shall not be
conditions of the effectiveness of the waiver. Attendance of a shareholder at a
meeting waives objection to lack of notice or defective notice of the meeting,
unless the shareholder at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting because of lack of notice or
defective notice, and waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice unless the shareholder objects to considering the matter when it
is presented. A director's attendance at or participation in a meeting waives
any required notice to him or her of the meeting unless the director, at the
beginning of the meeting or promptly upon his or her later arrival, objects to
holding the meeting or transacting business at the meeting because of lack of
notice or defective notice and does not thereafter vote for or assent to action
taken at the meeting, or if special notice was required of a particular purpose
pursuant to the Act, the director objects to transacting business with respect
to the purpose for which such special notice was required and does not
thereafter vote for or assent to action taken at the meeting with respect to
such purpose.

2.{PRIVATE } Action Without a Meeting

Any action required or permitted to be taken at a meeting of the
shareholders, directors or members of an executive or other committee, as
applicable, may be taken without a meeting if all shareholders entitled to vote
with respect to such action, or all directors or all members of an executive or
other committee, as the case may be, give written consent to such action in
writing. The record date for determining shareholders entitled to take action
without a meeting is the date a writing upon which the action is taken, pursuant
to this Section 2 of Article IV, is first received by the Corporation. Any
shareholder who has signed a writing describing and consenting to action taken
pursuant to this Section 2 of this Article IV may revoke such consent by a
writing signed by such shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the Corporation before the effectiveness of the action. Action taken without a
meeting shall be effective: in the case of an action of shareholders, as of the
date the last writing necessary to effect the action is received by the
Corporation unless all of the writings necessary to effect the action specify
another date, which may be before or after the date the writings are received by
the Corporation; and in the case of directors' action, action is taken when the
last director signs a writing describing the action taken unless before such
time the Secretary has received a written revocation of the consent of any other
director, and any action so taken shall be effective at the time taken unless
the directors specify a different effective date.

ARTICLE V{PRIVATE }
--------------------

Officers
--------

1.{PRIVATE } Election and Tenure

The officers of the Corporation shall consist of a Chairman of the Board, a
President, a Secretary and Treasurer, each of whom shall be appointed annually
by the Board of Directors. The Board of Directors may also designate and
appoint such other officers and assistant officers as may be deemed necessary.
The Board of Directors may delegate to any such officer the power to appoint or
remove subordinate officers, agents or employees. Any two or more offices may
be held by the same person. Each officer so appointed shall continue in office
until a successor shall be appointed and shall qualify, or until the officer's
earlier death, resignation or removal. Each officer shall be a natural person
who is eighteen years of age or older.

2.{PRIVATE } Resignation, Removal and Vacancies

Any officer may resign at any time by giving written notice of resignation to
the Board of Directors or the President. Such resignation shall take effect
when the notice is received by the Corporation unless the notice specifies a
later effective date, and acceptance of the resignation shall not be necessary
to render such resignation effective. Any officer may at any time be removed
by the Board of Directors. If any office becomes vacant for any reason, the
vacancy may be filled by the Board of Directors. An officer appointed to fill
a vacancy shall be appointed for the unexpired term of such officer's
predecessor in office and shall continue in office until a successor shall be
elected or appointed and shall qualify, or until such officer's earlier
death, resignation or removal. The appointment of an officer shall not
itself create contract rights in favor of the officer, and the removal of
an officer does not affect the officer's contract rights, if any, with the
Corporation and the resignation of an officer does not affect the
Corporation's contract rights, if any, with the officer.

3. Chairman of the Board.

The Chairman of the Board shall preside at meetings of the Board of Directors
and shall give counsel and advice to the Board of Directors and the
officers of the Corporation on all subjects concerning the welfare of the
Corporation and the conduct of its business. The Chairman of the Board of
Directors shall perform all other duties incident to the office of the
Chairman of the Board and such other duties as the Board may from time to
time determine.

4. President

The President shall be the principal executive officer of the Corporation and,
subject to the control of the Board of Directors, shall in general supervise
and control all of the business and affairs of the Corporation. The President
shall, when present, preside at all meetings of the shareholders. The
President in general shall perform all duties incident to the office of
President and such other duties as may be assigned by the Board of Directors
from time to time.

5. Vice Presidents

The Vice Presidents, if any, shall perform such duties and possess such
powers as from time to time may be assigned to them by the Board of Directors
or the President. In the absence of the President or in the event of the
inability or refusal of the President to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation,
then in the order of the election or appointment of the Vice Presidents) shall
perform the duties of the President and when so performing shall have all the
powers of and be subject to all the restrictions upon the President.

6. Secretary

The Secretary shall perform such duties and shall have such powers as may
from time to time be assigned by the Board of Directors or the President. In
addition, the Secretary shall perform such duties and have such powers as are
incident to the office of Secretary including, without limitation, the duty
and power to give notice of all meetings of shareholders and the Board of
Directors, the preparation and maintenance of minutes of the directors' and
shareholders' meetings and other records and information required to be kept
by the Corporation under Article III and for authenticating records of the
Corporation, and to be custodian of the corporate seal and to affix and
attest to the same on documents, the execution of which on behalf of the
Corporation is authorized by these Bylaws or by the action of the Board of
Directors.

7.{PRIVATE } Treasurer

The Treasurer shall perform such duties and shall have such powers as may
from time to time be assigned by the Board of Directors or the President. In
addition, the Treasurer shall perform such duties and have such powers as are
incident to the office of Treasurer including, without limitation, the duty
and power to keep and be responsible for all funds and securities of the
Corporation, to deposit funds of the Corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the Board
of Directors, making proper accounts thereof, and to render as required by the
Board of Directors statements of all these transactions taken as Treasurer and
of the financial condition of the Corporation.

8.{PRIVATE } Assistant Secretaries and Assistant Treasurers

The Assistant Secretaries and Assistant Treasurers, if any, shall perform
such duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors. In the absence,
inability or refusal to act of the Secretary or the Treasurer, the Assistant
Secretaries or Assistant Treasurers, respectively, in the order designated by
the Board of Directors, or in the absence of any designation, then in the
order of their election or appointment, shall perform the duties and exercise
the powers of the Secretary or Treasurer, as the case may be.

9.{PRIVATE } Bond of Officers

The Board of Directors may require any officer to give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for such terms and conditions as the Board of Directors
may specify, including without limitation for the faithful performance of such
officer's duties and for the restoration to the Corporation of any property
belonging to the Corporation in such officer's possession or under the control
of such officer.

10.{PRIVATE } Compensation

Officers of the Corporation shall be entitled to such salaries, emoluments,
compensation or reimbursement as shall be fixed or authorized from time to
time by the Board of Directors.

ARTICLE VI{PRIVATE }
-------------------

Indemnification
-----------------

1.{PRIVATE } Indemnification

To the extent permitted or required by the Act and any other applicable law,
if any director or officer of the Corporation is made a party to or is
involved in any proceeding because such person is or was a director or officer
of the Corporation, the Corporation shall (a) indemnify such person from and
against any liability, including but not limited to expenses of investigation
and preparation, expenses in connection with appearance as a witness, and fees
and disbursements of counsel, accountants or other experts, incurred by such
person in such proceeding, and (b) advance to such person expenses incurred in
such proceeding. The Corporation may in its discretion, but is not obligated
in any way to, indemnify and advance expenses to an employee or agent of the
Corporation to the same extent as to a director or officer, and the Corporation
may indemnify an employee, fiduciary, or agent of the Corporation to a greater
extent than expressly permitted herein for officers and directors if not
inconsistent with public policy.

2.{PRIVATE } Provisions Not Exclusive

The foregoing provisions for indmnificatoin and advancement of
expenses are not exclusive, and the Corporation may at its discretion provide
for indemnification or advancement of expenses in a resolution of its
shareholders or directors, in a contract or in its Articles of Incorporation.

3.{PRIVATE } Effect of Modification

Any repeal or modification of the foregoing provisions of this Article for
indemnification or advancement of expenses shall not affect adversely any right
or protection stated in such provisions with respect to any act or omission
occurring prior to the time of such repeal or modification. If any provision of
this Article or any part thereof shall be held to be prohibited by or invalid
under applicable law, such provision or part thereof shall be deemed amended to
accomplish the objectives of the provision or part thereof as originally written
to the fullest extent permitted by law, and all other provisions or parts shall
remain in full force and effect.

4.{PRIVATE } Definitions
As used in this Article, the following terms have the following meanings:

(a) Act. When used with reference to an act or omission occurring
prior to the effectiveness of any amendment to the Act which occurs after the
effectiveness of the adoption of this Article, the term "Act" shall include such
amendment only to the extent that the amendment permits a corporation to provide
broader indemnification rights than the Act permitted prior to the amendment.

(b) Corporation. The term "Corporation" includes any domestic or
foreign entity that is a predecessor of the Corporation by reason of a merger or
other transaction in which the predecessor's existence ceased upon consummation
of the transaction.

(c) Director or Officer. A "director" or "officer" is an individual
who is or was a director or officer of the Corporation or an individual who,
while a director or officer of the Corporation, is or was serving at the
Corporation's request as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or other person
or entity or of an employee benefit plan. A director or officer is considered
to be serving an employee benefit plan at the Corporation's request if his or
her duties to the Corporation also impose duties on, or otherwise involve
services by, the director or officer to the plan or to participants in or
beneficiaries of the plan. The terms "director" and "officer" include, unless
the context requires otherwise, the estate or personal representative of a
director, or officer.

(d) Liability. The term "liability" means the obligation incurred
with respect to a proceeding to pay a judgment, settlement, penalty, fine
(including any excise tax assessed with respect to an employee benefit plan), or
reasonable expenses.

(e) Proceeding. The term "proceeding" means any threatened, pending
or completed action, suit, or proceeding whether civil, criminal, administrative
or investigative, and whether formal or informal.

5.{PRIVATE } Insurance

The Corporation may purchase and maintain insurance on behalf of a person who
is or was a director, officer, employee, fiduciary, or agent of the
Corporation, or who, while a director, officer, employee, fiduciary, or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or entity or of an employee
benefit plan, against liability asserted against or incurred by the person in
that capacity or arising from his or her status as a director, officer,
employee, fiduciary, or agent, whether or not the Corporation would have power
to indemnify the person against the same liability under the Act. Any such
insurance may be procured from any insurance company designated by the Board
of Directors, whether such insurance company is formed under the laws of this
state or any other jurisdiction of the United States or elsewhere, including
any insurance company in which the Corporation has an equity or any other
interest through stock ownership or otherwise.

6.{PRIVATE } Expenses as a Witness

The Corporation may pay or reimburse expenses incurred by a director, officer,
employee, fiduciary, or agent in connection with an appearance as a witness in a
proceeding at a time when he or she has not been made a named defendant or
respondent in the proceeding.

7.{PRIVATE } Notice to Shareholders

If the Corporation indemnifies or advances expenses to a director under this
Article in connection with a proceeding by or in the right of the Corporation,
the Corporation shall give written notice of the indemnification or advance to
the shareholders with or before the notice of the next shareholders' meeting.
If the next shareholder action is taken without a meeting at the instigation of
the Board of Directors, such notice shall be given to the shareholders at or
before the time the first shareholder signs a writing consenting to such action.

ARTICLE VII{PRIVATE }
--------------------

Execution of Instruments; Loans; Checks and Endorsements
--------------------------------------------------------

Deposits; Proxies
-----------------

1.{PRIVATE } Execution of Instruments

The President or any Vice President shall have the power to
execute and deliver on behalf of and in the name of the Corporation any
instrument requiring the signature of an officer of the Corporation, except as
otherwise provided in these Bylaws or when the execution and delivery of the
instrument shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.

2.{PRIVATE } Borrowing

No loan shall be contracted on behalf of the Corporation, and no evidence of
indebtedness for borrowed money shall be issued, endorsed or accepted in its
name, unless authorized by the Board of Directors or a committee designated by
the Board of Directors so to act. Such authority may be general or confined
to specific instances. When so authorized, an officer may (a) effect loans at
any time for the Corporation from any bank or other entity and for such loans
may execute and deliver promissory notes or other evidences of indebtedness of
the Corporation; and (b) mortgage, pledge or otherwise encumber any real or
personal property, or any interest therein, owned or held by the Corporation
as security for the payment of any loans or obligation of the Corporation, and
to that end may execute and deliver for the Corporation such instruments as
may be necessary or proper in connection with such transaction.

3.{PRIVATE } Loans to Directors, Officers and Employees

The Corporation may lend money to, guarantee the obligations of and
otherwise assist directors, officers and employees of the Corporation, or
directors of another corporation of which the Corporation owns a majority of
the voting stock, only upon compliance with the requirements of the Act.

4.{PRIVATE } Checks and Endorsements

All checks, drafts or other orders for the payment of money,
obligations, notes or other evidences of indebtedness, bills of lading,
warehouse receipts, trade acceptances and other such instruments shall be signed
or endorsed for the Corporation by such officers or agents of the Corporation as
shall from time to time be determined by resolution of the Board of Directors,
which resolution may provide for the use of facsimile signatures.

5.{PRIVATE } Deposits

All funds of the Corporation not otherwise employed shall be deposited from
time to time to the Corporation's credit in such banks or other depositories
as shall from time to time be determined by resolution of the Board of
Directors, which resolution may specify the officers or agents of the
Corporation who shall have the power, and the manner in which such power shall
be exercised, to make such deposits and to endorse, assign and deliver for
collection and deposit checks, drafts and other orders for the payment of
money payable to the Corporation or its order.

6.{PRIVATE } Proxies

Unless otherwise provided by resolution adopted by the Board of Directors, the
President or any Vice President: (a) may from time to time appoint one or
more agents of the Corporation, in the name and on behalf of the Corporation,
(i) to cast the votes which the Corporation may be entitled to cast as the
holder of stock or other securities in any other corporation, association or
other entity whose stock or other securities may be held by the Corporation,
at meetings of the holders of the stock or other securities of such other
corporation, association or other entity, or (ii) to consent in writing to any
action by such other corporation, association or other entity; (b) may
instruct the person so appointed as to the manner of casting such votes or
giving such consent; and (c) may execute or cause to be executed in the name
and on behalf of the Corporation and under its corporate seal, or otherwise,
all such written proxies or other instruments as may be deemed necessary or
proper.

ARTICLE VIII{PRIVATE }
--------------------

Shares of Stock
---------------

1.{PRIVATE } Certificates of Stock

The shares of the Corporation may but need not be represented by certificates.
Unless the Act or another law expressly provides otherwise, the fact that the
shares are not represented by certificates shall have no effect on the rights
and obligations of shareholders. If the shares are represented by certificates,
such certificates shall be signed either manually or in facsimile by the
President and the Secretary or such other representatives of the Corporation as
are designated by the Board of Directors. If the person who signed, either
manually or in facsimile, a share certificate, no longer holds office when the
certificate is issued, the certificate is nevertheless valid. Every certificate
representing shares issued by the Corporation shall state the number and class
of shares and the designation of the series, if any, the certificate represents,
and shall otherwise be in such form as is required by law and as the Board of
Directors shall prescribe.

2.{PRIVATE } Shares Without Certificates

The Board of Directors may authorize the issuance of any class
or series of shares of the Corporation without certificates. Such authorization
shall not affect shares already represented by certificates until they are
surrendered to the Corporation. Within a reasonable time following the issue or
transfer of shares without certificates, the Corporation shall send the
shareholder a complete written statement of the information required on
certificates by the Act.

3.{PRIVATE } Record

A record shall be kept of the names and addresses of the Corporation's
shareholders, in a form that permits preparation of a list of shareholders
that is arranged by voting group and within each voting group by class or
series of shares, that is alphabetical within each class or series, and that
shows the addresses of, and the number of shares of each class and series and
the date of issuance of the shares (and in case of cancellation, the date of
cancellation) held by, each shareholder. The person or other entity in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof, and thus a holder of record of such shares of stock, for all
purposes as regards the Corporation.

4.{PRIVATE } Transfer of Stock

Transfers of shares of the stock of the Corporation shall be made only on the
books of the Corporation by the registered holder thereof, or by such registered
holder's attorney thereunto authorized, and on the surrender of the certificate
or certificates for such shares properly endorsed.

5.{PRIVATE } Transfer Agents and Registrars; Regulations

The Board of Directors may appoint one or more transfer agents or registrars
with respect to shares of the stock of the Corporation. The Board of
Directors may make such rules and regulations as it may deem expedient and as
are not inconsistent with these Bylaws, concerning the issue, transfer and
registration of certificates for shares of the stock of the Corporation.

6.{PRIVATE } Lost, Destroyed or Mutilated Certificates

In case of the alleged loss, destruction or mutilation of a certificate
representing stock of the Corporation, a new certificate may be issued in
place thereof, in such manner and upon such terms and conditions as the Board
of Directors may prescribe, and shall be issued in such situations as required
by the Act.

ARTICLE IX{PRIVATE }
---------------------

Corporate Seal
----------------

The corporate seal shall be in the form approved by resolution of the Board
of Directors. Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced. The impression of the
seal may be made and attested by either the Secretary or any Assistant Secretary
for the authentication of contracts or other papers requiring the seal.

ARTICE X {PRIVATE }
------------

Fiscal Year
-----------

The fiscal year of the Corporation shall be the year established by the
Board of Directors.

ARTICLE XI{PRIVATE }
---------------------

Corporate Records
-----------------

1.{PRIVATE } Corporate Records

The Corporation shall comply with the provisions of the Act regarding
maintenance of records and shall keep such records at such place as the Act
may designate or, if the Act does not designate the place for such records,
then at such place or places as may be from time to time designated by the
Board of Directors.

2.{PRIVATE } Addresses of Shareholders

Each shareholder shall furnish to the Secretary of the
Corporation or the Corporation's transfer agent an address to which notices from
the Corporation, including notices of meetings, may be directed and if any
shareholder shall fail so to designate such an address, it shall be sufficient
for any such notice to be directed to such shareholder at such shareholder's
address last known to the Secretary or transfer agent.

3.{PRIVATE } Fixing Record Date

The Board of Directors may fix in advance a date as a record date for the
determination of the shareholders entitled to a notice of or to vote at any
meeting of shareholders or entitled to receive payment of any dividend or other
distribution or allotment of rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action. Such record
date shall not be more than 70 days before the meeting or action requiring a
determination of shareholders; except that the record date for determining
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken is the date upon which a writing upon which such
action is taken is first received by the Corporation. Only such shareholders as
shall be shareholders of record on the date so fixed shall be so entitled with
respect to the matter to which the same relates. If the Board of Directors
shall not fix a record date as above provided, then the record date shall be
determined in accordance with the Act.

4.{PRIVATE } Inspection of Corporate Records

Shareholders shall have those rights to inspect and copy the Corporation's
records as provided in the Act.

5.{PRIVATE } Distribution of Financial Statements

Upon the written request of any shareholder of the Corporation, the
Corporation shall mail to such shareholder its last annual and most recently
published financial statement, if any.

6.{PRIVATE } Audits of Books and Accounts

The Corporation's books and accounts may be audited at such times
and by such auditors as shall be specified and designated by resolution of the
Board of Directors.

ARTICLE XII{PRIVATE }

Emergency Bylaws and Actions
------------------------------

Subject to repeal or change by action of the shareholders, the Board of
Directors may adopt emergency bylaws and exercise other powers in accordance
with and pursuant to the provisions of the Act.

XIII{PRIVATE }
------------

Amendments
------------

The Board of Directors may amend or repeal these Bylaws or adopt new
bylaws. The shareholders may also amend or repeal these Bylaws or adopt new

1996 KEY EXECUTIVE INCENTIVE BONUS PLAN
SCOTT'S LIQUID GOLD-INC.

PURPOSE OF THE PLAN

The purpose of the Key Executive Incentive Bonus Plan (the "Plan") is to provide
incentive to the Company's key executives to maximize corporate earnings for
1996 and to reward such executives based upon performance.

STRUCTURE OF THE PLAN

This Plan is constructed to reserve exclusively to the shareholders the first $1
million in pre-tax earnings. Thereafter, for each $1 million in additional pre-
tax earnings , a bonus of $100,000 will be paid as an incentive bonus.

This Plan is also constructed so as to encourage Management to expend every
effort possible to increase pre-tax earnings in excess of $1 million. The more
pre-tax profit the Company makes, the greater the bonus and the greater the
return to the Company's shareholders. Further, by not capping bonuses to be
paid under this Plan, the Board of Directors believes that the incentives to the
Company's executives to make larger and larger profits will not be limited.

PLAN PROVISIONS

1. For 1996, a bonus pool equal to 10% of pre-tax earnings in excess of $1
million will be set aside for distribution to the Company's key executives.

2. Partial distributions of the bonus pool may be made in December of 1996,
but the final distribution is only to be made after the close of the year,
based upon audited pre-tax profits, during the quarter following the close
of the fiscal year.
3. Bonuses, if any, for 1996, will be divided equally among the Company's four

EXHIBIT 13

SCOTT'S LIQUID GOLD-INC.
1995 ANNUAL REPORT

DESCRIPTION OF BUSINESS

general

Scott's Liquid Gold-Inc. was incorporated in Colorado on February 15, 1954 and
is headquartered in Denver, Colorado. Through its wholly-owned subsidiaries, the
Company manufactures and markets high quality household chemical products, skin
care products, and a line of disposable cigarette filters. In this report, the
term "Company" refers to Scott's Liquid Gold-Inc. and its subsidiaries.

The Company's household chemical products consist primarily of "Scott's
Liquid Gold"for wood, a wood preservative and cleaner sold nationally for
nearly 25 years, and "Touch of Scent", an aerosol room air freshener
distributed nationally since 1982. To expand its consumer products base and to
capitalize upon its established distribution network, the Company entered into
the cosmetics business in early 1992 through a subsidiary, Neoteric Cosmetics,
Inc., which introduced two skin care products under the name "Alpha Hydrox".

At the end of 1995, more than twenty-five skin care products were being marketed
by the Company, with additional products being prepared and proposed for market
introduction during 1996. Net sales of Alpha Hydrox products have grown rapidly,
from $5.9 million in 1992 to $31.6 million in 1995.

strategy

The Company's policy is to manufacture and market high quality consumer
products that are distinct within each category in which the Company competes.
Scott's Liquid Gold for wood distinguishes itself from competing products as a
wood cleaner and preservative, not simply a polish. Touch of Scent is different
from competing aerosol air fresheners in that it need not be shaken before each
use and, since it is activated by a dispenser mounted to any smooth surface, it
is more convenient to use than competing brands. With respect to Alpha Hydrox,
the Company's line of cosmetics products, it was the first alpha hydroxy acid
skin care product sold to the mass market at prices which consumers can afford.

The Company's goal is to increase sales and profits with an emphasis on its
skin care products. As part of its strategy to achieve this goal, the Company
expanded its physical plant in Denver, a project which was completed in early
1996. Ongoing efforts to achieve this goal include the following: (1) the
continuation of an aggressive advertising posture; (2) the development of
additional skin care products where a perceived consumer need exists; and (3)
focusing on domestic sales while not ignoring opportunities for expansion into
other countries (the Canadian market was opened in 1995). Regarding the first
point, the Company believes that sales of its consumer products require the
support of effective advertising.

In addition to television advertising and the commencement of radio spots, the
Company endeavors to impart the benefits of Alpha Hydrox to consumers by
furnishing information to health and beauty editors of magazines, newspapers,
and television information programs concerning developments in and advantages of
alpha hydroxy acids for skin beautification. Additionally, to augment its
ongoing educational program, the Company provides a 24-hour toll-free line to
consumers.

products

Scott's Liquid Gold for wood, a wood cleaner and preservative, has been the
Company's core product since the Company's inception. It has been well-known in
the U.S. market for nearly twenty-five years. In 1982, the Company added Touch
of Scent, a room air freshener, to its line of household chemical products. The
Company believes that Touch of Scent is the most convenient to use air freshener
available. Household chemical products accounted for 40.7% of the Company's
consolidated net sales in 1994, and 36.8% in 1995.

Scott's Liquid Gold for wood, when applied to wood surfaces such as furniture,
paneling, and kitchen cabinets, and to outside stained doors and decking ,
penetrates microscopic pores in the surface and lubricates beneath, restoring
moisture and, at the same time, minimizes the appearance of scratches, darkening
the wood slightly. Scott's Liquid Gold preserves wood's natural complexion and
beauty without wax.

Touch of Scent is sold with a decorative plastic dispenser which can be
mounted on any hard surface and into which the consumer inserts an aerosol
refill unit. At a touch of the dispenser, any one of several fragrances
contained in the refill unit is propelled into the air, masking unpleasant odors
and refreshing the air with a pleasant scent. The Company manufactures both the
dispenser and the refill unit. Unlike some competitive aerosol air fresheners,
Touch of Scent is extremely dry and, therefore, leaves practically no residue
after use. The Company recently reformulated its Touch of Scent product so as to
reduce the emission of volatile organic compounds as is required by the
environmental laws of the State of California beginning on January 1, 1996 and
to use an improved, concentrated formula. Additionally, in 1996, the Company is
test marketing a new variety of highly decorative Touch of Scent dispensers.

In early 1992, the Company began to market two skin care products under the
trade name of Alpha Hydrox. At the end of 1995, the Company's skin care line
consisted of over 20 products, with more on the way for introduction in 1996.
The viability of each new product is monitored; a limited men's line of products
is being discontinued because of low sales. Most of the Company's Alpha Hydrox
products, which are sold by a wholly-owned subsidiary, Neoteric Cosmetics, Inc.,
contain alpha hydroxyethanoic acids in low but effective concentrations. Alpha
hydroxyethanoic acids act as an exfoliant which gently sloughs off dead skin
cells to promote a healthier, more youthful appearance. Some of the Company's
skin care products, such as its moisturizers, do not contain an alpha hydroxy
acid, but are marketed to be used in conjunction with those which do. Alpha
Hydrox products accounted for 57.3% of the Company's consolidated net sales in
1994, and 61.1% in 1995.

In addition to household chemical and skin care products, the Company produces
a line of disposable cigarette filters known as Aquafilters. Although
Aquafilters are designed to trap some of the tar, nicotine, carcinogens and
toxic gases otherwise admitted into a smoker's body, sales of this product line
have decreased steadily over the last several years. The cigarette filter
business accounted for 2.0% of the Company's consolidated net sales in 1994 and
2.1% in 1995.

The Company also manufactures injection molded components for household
chemical products and Aquafilters. These components consist principally of
plastic caps for Touch of Scent and Scott's Liquid Gold, dispensers for Touch of
Scent, and holders for Aquafilters. The Company had considered in-house
manufacturing of bottles and jars for Alpha Hydrox. However, because extensive
capital outlays were involved in the Company's recent plant and office
expansion, the Company is no longer considering such in-house manufacturing.

marketing and distribution

All of the Company's products are sold nationally, directly and through
independent brokers, to mass marketers, drugstores, supermarkets, wholesale
distributors and other retail outlets. In 1995, one customer, Wal-Mart Stores,
Inc. of Bentonville, Arkansas, accounted for approximately 22.6% of the
Company's sales of household chemical products and 22.0% of Alpha Hydrox sales.
This customer is not related to the Company. A loss of this large customer would
have a material effect on the Company if the Company's consumer base served by
that customer did not purchase the Company's products at other retail outlets.
No long-term contracts exist between the Company and Wal-Mart Stores, Inc. or
any other customer. As is common in the industry, the Company permits returns of
its products by customers.

The Company's household chemical products and Alpha Hydrox are advertised
nationally on network and, at times, on cable television and in print media. The
Company is also testing the use of radio ads in certain geographic areas. The
Company maintains an aggressive posture in promoting and advertising its skin
care products. The Company's goal is to increase its share of the skin care
market each year over the next several years, which it believes it has the
resources to do. During 1996, however, but subject to change, the Company's
budget calls for a decrease in advertising expenses, as a percentage of net
sales, from 1995 levels. The Company believes that decreasing expenditures for
advertising in 1996 will not affect the Company's ability to reach its 1996
sales goals, but there can be no assurance that such goals will be attained or,
indeed, that the Company will maintain its current market share. However, the
Company notes that even at budgeted 1996 advertising levels, consolidated net
sales for 1996 can decrease from 1995 levels by more than 10% without affecting
the Company's ability to service its bond debt. Further, the Company
periodically considers adjustments to advertising expenditures based on
consolidated net sales, endeavoring in the process to gauge the cost
effectiveness of its advertising.

manufacturing

The Company owns and operates its manufacturing facilities and equipment. The
Company manufactures all of its products, maintaining a high quality standard
and sufficient inventories to ship most orders as they are received. Quality
control is enforced at all stages of production, as well as upon the receipt of
raw materials from suppliers. Raw materials are purchased from a number of
suppliers and, at the present time, are readily available. There is only one
U.S. manufacturer of the type of alpha hydroxy acid used by the Company.
Relations with that supplier are satisfactory. Most of the Company's
manufacturing operations, including most packaging, are highly automated, and,
as a result, the Company's manufacturing operations are not labor intensive,
nor, for the most part, do they involve extensive training. From time to time,
the Company's facilities for the manufacture of Alpha Hydrox products have been
stretched to near capacity. The addition to the Company's plant facilities,
completed in early 1996, has more than doubled the Company capacity for skin
care products, which the Company believes will be adequate for the foreseeable
future.

competition

The Company's business is highly competitive in both household chemical and
skin care products. The Company competes with several companies engaged in
marketing air fresheners and products designed for the beautification of wood,
but it does not have sufficient information to make an accurate representation
as to the market share of its products. Both the air freshener and wood care
categories are dominated by three to five manufacturers significantly larger
than the Company, each of which produce several products. Irrespective of the
foregoing, over the years, the Company has maintained a strong national base of
distribution for its household chemical products.

The skin care category is also highly competitive. Several competitors are
significantly larger than Scott's Liquid Gold-Inc., and each of these
competitors produces several products. Some of these companies, including some
new competitors, also produce alpha hydroxy acid products with which Alpha
Hydrox must compete. Because of the number of varied products produced by
competitors, the Company cannot make an accurate representation as to the market
share of its skin care products. Irrespective of the foregoing, it can be stated
that the Company has established a strong national base of distribution for
Alpha Hydrox, and, based upon data obtained from an independent rating service,
believes that its products rank high among leading brand-name alpha hydroxy acid
skin care products.

The Company knows of few competitors who market cigarette filters. While the
Company does not have sufficient information to make a representation as to its
share of this market, it believes it to be significant in an insignificant
category.

As a matter of corporate philosophy, the Company subscribes to the belief that
quality and product performance are an attraction to the consuming public. The
Company, therefore, competes on the basis of quality and distinguishing
characteristics of its products. See Strategy above.

regulation

The Company is subject to various federal, state and local laws and
regulations which pertain to the type of products it manufactures and sells. The
Company's skin care products containing alpha hydroxy acids are cosmetics within
the meaning of the Federal Food Drug and Cosmetic Act ("FDCA") The FFDCA
defines `cosmetics'' as products intended for cleansing, beautifying, promoting
attractiveness or altering the appearance. The Company's cosmetic products are
subject to regulation under the FFDCA and the Fair Packaging and Labeling Act
("FPLA") and the regulations promulgated under these acts. The relevant laws
and regulations are enforced by the U.S. Food & Drug Administration ("FDA").
Such laws and regulations govern the ingredients and labeling of cosmetic
products and set forth general manufacturing practices for companies to follow.
Although FDA regulations require that the safety of a cosmetic ingredient be
substantiated prior to marketing, there is no requirement that a company
contemplating inclusion of a cosmetic ingredient in its products submit to the
FDA the results of its testing or any other data or information with respect to
the ingredient. Prior to marketing its products, the Company conducts studies to
demonstrate that its Alpha Hydrox products do not irritate the skin or eyes.
Consistent with FDA regulations, the Company has not submitted the results of
its studies to the FDA.

In April of 1994, an FDA official raised some questions about the safety of
alpha hydroxy acids in skin care products, and later indicated that the effects
of long-term usage of such products are unknown. The Cosmetic Ingredient Review
("CIR") Expert Panel sponsored by the cosmetics industry, is currently
conducting a review of a compilation of alpha hydroxy acid safety data assembled
by cosmetic manufacturers. The CIR is a cooperative proceeding in which an FDA
representative can and does participate as a non-voting, liaison member. There
can be no assurance that the FDA will not adopt new regulations directed at
alpha hydroxy acid products that could adversely affect the Company's cosmetics
business.

Based upon information available to the Company, the Company believes that
Alpha Hydrox products are safe and that the possibility of FDA action against
its products is remote. The Company's products contain concentrations of alpha
hydroxy acids ranging from zero to 8.4% , the highest percentage being several
times lower than a chemical peel product that posed a problem of acute skin
irritation and was the target of an FDA warning letter in the past. To enable
consumers to make informed decisions, the Company lists the concentration of
alpha hydroxy acid on its product containers and in its other promotional
materials, does not exaggerate benefits to be expected from the use of its
products, and recommends to consumers the use of a sunscreen in its written
directions contained in every box. Further, the package also includes a toll-
free telephone number for consumers to call with questions and concerns.

The Company's advertising is subject to regulation under the Federal Trade
Commission Act and its implementing regulations, which prohibit false and
misleading claims in advertising. The Company's labeling and promotional
materials are believed to be in full compliance with applicable statutes and
regulations.

Some chemicals used in consumer products, including some used by the Company,
have come under scrutiny by various state governments and the Congress of the
United States in connection with clean air laws and regulations. These chemicals
are volatile organic compounds ("VOCs") that are contained in various
categories of consumer products. As a result of VOC regulation, it was necessary
for the Company to reformulate some of its products. In late 1995, for example,
the Company changed its formula for Touch of Scent to conform to regulations of
the California Air Resources Board ("CARB") which became effective with regard
to air fresheners on January 1, 1996. The Company believes it has done all that
is now necessary to satisfy the current requirements of the Clean Air Act and
laws of various state governments. These laws and regulations have not affected
the Company's skin care products. However, under CARB regulations, the Company
has not been permitted to sell its pourable form of Scott's Liquid Gold wood
cleaner and preservative in California since January 1, 1994, but is permitted
to sell the aerosol form of this product.

Limitations regarding the VOC content of consumer products by both state and
federal agencies will continue to be a part of regulatory efforts to achieve
compliance with standards for ozone at or near ground level. Under the Clean Air
Act Amendments of 1990, the Environmental Protection Agency ("EPA") is
required to study the contribution of consumer products to ground-level ozone
problems and to promulgate regulations reducing the VOC content of consumer
products. During 1995, the EPA published a prioritized list of categories of
consumer products for regulation, including categories which affect Scott's
Liquid Gold for Wood and Touch of Scent. Regulations pertaining to those
products, which the Company believes, but can not assure, will be no more
stringent than those issued previously by CARB, are scheduled to be issued in
1997. Various states, in addition to California, have enacted or are considering
promulgating VOC regulations. The Company is unable to predict how many or which
other states might enact legislation regulating the VOC content of consumer
products or what effect such legislation might have upon its household chemical
products.

employees

The Company employs 189 persons, 117 in plant and production related functions
and 72 in administrative, sales and advertising functions. No contracts exist
between the Company and any union. The Company monitors wage and salary rates in
the Rocky Mountain area and pursues a policy of providing competitive
compensation to its employees. The compensation of the Company's executive
officers is under the purview of the Compensation Committee of the Company's
Board of Directors. Fringe benefits for Company employees include an excellent
medical and dental plan, life insurance, a 401K Plan with matching contributions
for lower paid employees (those earning $30,000 or less per annum), an Employee
Stock Ownership Plan, and a Profit Sharing Plan. The Company considers its
employee relations to be satisfactory.

patents and trademarks

The Company actively uses its registered trademarks for Scott's Liquid Gold,
Liquid Gold, Touch of Scent, and Neoteric in the United States and has
registered trademarks in several additional countries.

The U.S. patent for the dispenser and cap designs for Touch of Scent expired
in 1995. The Company has owned this patent since 1981 when it was purchased from
an unrelated company, and has considered it to be significant because of its
conceptual advantage over other competing products. Because the Company has
produced Touch of Scent for approximately 16 years and has established a
consumer base for the product, the Company believes, but cannot assure, that the
expiration of its patent will have no material effect on sales of Touch of
Scent.

The Company has applied for federal registration of the trademark "Alpha
Hydrox". The issuance of this trademark is being challenged on the basis that
the name of the Company's product falls in the realm of a general description of
the type of acid used as an ingredient. The Company believes that the issuance
or non-issuance of this trademark is not material to the Company or to its sales
of Alpha Hydrox products. Whether or not the federal registration of Alpha
Hydrox is granted to the Company, the Company claims under common law the
exclusive right to use Alpha Hydrox as a trademark and to the right to prevent
the use by others of confusingly similar marks. The outcome of any such claim,
if contested in court, will depend on the facts and circumstances then existing
with respect to the use of the mark in a particular geographical area.

The Company's U.S. patents pertaining to Aquafilter disposable cigarette
filters have expired. The Company no longer considers these patents to be
significant, irrespective of the uniqueness of this item. The Company intends
to renew its U.S. Aquafilter trademark, which expires in 1996. Such trademark
is registered in numerous countries.

legal proceedings

The Company filed two lawsuits in 1995 and early 1996 against companies which
the Company asserts have infringed the Company's trademark and trade dress
rights and have unfairly competed with the Company's Alpha Hydrox products. Both
of these companies are private label producers of alpha hydroxy skin care
products which are sold to customers of the Company and result in confusion in
the mind of the consumer.

With regard to a suit filed against the Company by the U.S. Justice Department
on behalf of the United States Army, see "Management Discussion and Analysis of
Financial Condition and Results of Operations-Other".

properties

The Company's Denver facilities are currently comprised of three connecting,
modern buildings and a parking garage (approximately 261,100 square feet in
total) and about 16.2 acres of land, of which approximately 6 acres remain for
future expansion. These buildings range in age from 0 to 25 years (126,600
square feet having been added in 1995). The Denver facility houses the Company's
corporate headquarters and all operations except those of Aquafilter
Corporation, and serves as one of several distribution points. All of the
Company's land and buildings in Denver serve as collateral under a deed of trust
for a $12.0 million bond issue consummated by the Company on July 29, 1994. In
addition to the Company's properties in Denver, Aquafilter Corporation, a
subsidiary of the Company, owns a modern 50,000 square foot manufacturing and
office facility in Fort Lauderdale, Florida, which is subject to a mortgage
($466,600 at December 31, 1995). The Fort Lauderdale facility is used for the
production of Aquafilters and, additionally, serves as a warehouse and
distribution point for the Company's household chemical and skin care products.

The addition of the aforecited 126,600 square feet in Denver was prompted by
the growth of the Company's cosmetics business. Such construction includes a
74,600 square foot office building and a 52,000 square foot addition to the
Company's previously existing 134,500 square feet (reported previously as
126,000 square feet) of manufacturing and warehouse space. The Company believes
that its current space will provide capacity for growth for at least the next
five years.

PRODUCTS AND SERVICES

Scott's Liquid Gold (R)

In the United States, ``Scott's Liquid Gold'' has continued to be a leader in
wood care products for nearly twenty-five years and, for many years prior to its
introduction nationally, was held in high esteem regionally. Its longevity in
the market place attests to its effectiveness. Affected by some heating and air
conditioning systems, by dust, dirt, age and use, expensive wood panelling,
kitchen cabinets, and furniture thirst for the penetrating, preserving action of
"Scott's Liquid Gold" to inhibit warping, cracking, shrinking and loss of
color. Replacing fine wood has always been expensive, whereas preserving them
with "Scott's Liquid Gold" is far more economical.

In addition to uses inside the home and office, many consumers have discovered
the benefits of using "Scott's Liquid Gold" on outside stained doors and
decking which are exposed to the elements, causing drying and cracking.

Through years of advertising, the Company has conveyed the message that
`Scott's Liquid Gold'' is a wood preservative and cleaner, not a polish, and is
effective on any natural wood surface whether it be panelling or furniture. The
fact that "Scott's Liquid Gold" continues to be a leader in many supermarkets
and non-food chains is proof of its quality. "Scott's Liquid Gold" is or has
been advertised nationally on television and in newspapers.

Touch of Scent (R)

The Company believes "Touch Of Scent" air freshener is the most convenient-
to-use air freshener available anywhere.The "Touch of Scent" system consists
of an attractive wall dispenser unit - available in several colors and designs -
which mounts easily on any wall or hard surface, and a specially designed
"Touch Of Scent" refill can, available in several delightful fragrances, which
slips into the dispenser and is ready to work at the touch of a finger. "Touch
Of Scent" is or has been nationally advertised on television and in newspapers.

AQUAFILTER (R) CIGARETTE FILTERS

"Aquafilter" cigarette holders, which the Company believes possess a superb,
built-in filtration system, are designed to trap and hold a large portion of the
tar, nicotine, carcinogens and toxic gases otherwise admitted to a cigarette
smoker's system, without changing the taste.

ALPHA HYDROX TM

"Alpha Hydrox" made its national debut in early 1992 as a skin creme and
lotion. Since then, the Company has introduced more than twenty additional skin
care products and, in 1996 expects to introduce additional products to the
marketplace. Each product in the Company's family of "Alpha Hydrox" products
is designed to beautify the skin. Most of the products contain, as their active
ingredient, an alpha hydroxy acid which gently sloughs off dead skin cells,
rejuvenating the skin and promoting a healthier, more youthful appearance. Some
"Alpha Hydrox" products, such as the moisturizers, do not contain an alpha
hydroxy acid, but are designed to complement those which do.

SLG PLASTICS, INC.

This wholly-owned subsidiary produces an uninterrupted supply of plastic
components for household chemical and "Aquafilter" products at substantial
savings to the Company. Products produced include caps for household chemical
items, dispensers for "Touch Of Scent" and holders for "Aquafilters".

ADVERTISING PROMOTIONS INCORPORATED

Advertising Promotions Incorporated assists with advertising for Scott's
Liquid Gold-Inc. and its subsidiaries.

SELECTED FINANCIAL DATA

Scott's Liquid Gold-Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In Thousands of Dollars) 1995 1994 1993 1992 1991

Revenues
<S> <C> <C> <C> <C> <C>
Scott's Liquid Gold
household products $19,238 $21,960 $20,765 $22,452 $20,772
Neoteric Cosmetics 31,924 30,583 15,790 5,932 -
Aquafilters 1,095 1,103 1,234 1,235 1,306
_____________________________________________
$52,257 $53,646 $37,789 $29,619 $22,078

Income from operations
before income taxes $ 4,554 $9,653 $4,884 $ 180 $ 2,077
Provision for income taxes 1,731 3,801 1,955 63 777

Income before extraordinary
item and accounting change 2,823 5,852 2,929 117 1,300
Tax benefit of operating
loss carryforward - - - - 257
Cumulative effect at
January 1, 1992 of income
tax accounting change - - - 257 -
________________________________________________
Net income $2,823 $5,852 $2,929 $ 374 $1,557

Primary Per Share Data
Income before extraordinary
item and accounting change $ .28 $ .57 $ .30 $ .01 $ .14
Tax benefit of operating
loss carryforward - - - - .03
Cumulative effect at
January 1, 1992 of income tax
accounting change - - - .03 -

Primary earnings per share $ .28 $ .57 $ .30 $ .04 $ .17

Fully diluted earnings
per share $ .28 $ .57 $ .29 $ .04 $ .17

Dividends declared
per common share $ .10 $ .10 $ - $ - $ -

Assets $35,661 $32,231 $17,311 $13,312 $14,629

Working capital* $6,497 $8,501 $4,676 $2,217 $2,826

Capital additions $10,537 $4,153 $ 474 $ 709 $ 271

Depreciation $ 820 $ 636 $ 643 $ 608 $ 610

Long-term debt* $10,474 $11,467 $2,631 $3,621 $4,718

* See Management Discussion and Analysis of Financial Condition and Results
of Operations.
</TABLE>

Selected Quarterly Financial Data
<TABLE>
1995

<CAPTION>
First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>

Net sales $14,448 $14,616 $12,585 $10,110 $51,759
Gross profit $10,575 $10,525 $8,707 $7,867 $37,674
Income from operations
before income taxes $ 49 $ 589 $ 1,371 $ 2,545 $ 4,554
Net income $ 30 $ 362 $ 844 $ 1,587 $ 2,823
Primary earnings per share $ - $ .04 $ .08 $ .16 $ .28
Fully diluted earnings
per share $ - $ .04 $ .08 $ .16 $ .28
</TABLE>

1994
<TABLE>
<CAPTION>
First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>

Net sales $13,074 $15,513 $12,172 $12,649 $53,408
Gross profit $9,476 $11,664 $9,424 $9,391 $39,955
Income from operations
before income taxes $ 1,346 $3,391 $2,361 2,555 $ 9,653
Net income $ 814 $2,026 $1,419 1,593 $ 5,852
Primary earnings per share $ .08 $ .20 $ .14 $ .15 $ .57
</TABLE>

MANAGEMENT DISCUSSION AND ANALSYS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

general

The Company manufactures and markets household chemical products, skin care
products and cigarette filters. In early 1992, the Company entered into the
cosmetics business, introducing a new line of skin care products, Alpha Hydrox,
which is sold throughout the United States. Sales of the cosmetics line were
$15.8 million in 1993, $30.6 million in 1994, and $31.6 million in 1995. As a
result, the Company experienced record revenues and profits in both 1993 and
1994, but, due to heavy advertising of cosmetics products during 1995 and a
decline of 12.3% in sales of the Company's household chemical products, the
Company's net income was lower in 1995 than in 1994.

<TABLE>
results of operations

Summary of Results as a Percentage of Net Sales
<CAPTION>

Year Ended December 31,
1993 1994 1995
<S> <C> <C> <C>

Net sales
Scott's Liquid Gold
household products 54.8% 40.7% 36.8%
Neoteric Cosmetics 41.9% 57.3% 61.1%
Aquafilters 3.3% 2.0% 2.1%
__________________________
Total net sales 100.0% 100.0% 100.0%
Cost of sales 30.9% 25.6% 28.2%
__________________________
Gross profit 69.1% 74.4% 71.8%
Other revenue 0.3% 0.4% 1.0%
__________________________
69.4% 74.8% 72.8%
_________________________
Operating expenses 55.3% 55.3% 62.4%
Interest 1.1% 1.2%1 .6%
________________________
56.4% 56.5% 64.0%
_________________________
Income before income taxes 13.0% 18.1% 8.8%
=========================

</TABLE>

year ended December 31, 1995
compared to year ended December 31, 1994

Consolidated net sales for 1995 were $51.7 million vs. $53.4 million for 1994,
a decrease of $1,650,000 or about 3.1%. Included in the aggregate sales decrease
is a decrease in average selling prices of $512,625, of which $476,300 pertains
to a decrease in average selling prices of cosmetics products and $36,325
pertains to a decrease in average selling prices of household chemical products.
(Average selling prices of Scott's Liquid Gold wood care products were up by
$292,975, but average selling prices of Touch of Scent were down by $329,300).
Over 80% of the decrease in average selling prices occurred during the last
quarter of 1995.

Industry-wide sales of branded alpha hydroxy cosmetics products were
relatively flat in 1995 compared to 1994. During 1995, net sales of the
Company's cosmetics products accounted for 61.1% of consolidated net sales
compared to 57.3% in 1994. Net sales of these products for 1995 were $31,623,200
compared to $30,583,000 in 1994, an increase of $1,040,200, or 3.4%. The Company
attributes such increase to several factors: extensive advertising of the
Company's cosmetics line, competitive pricing, the addition of new products in
mid and late 1995, and the efficacy of the Company's products. Irrespective of
the 1995 increase in sales of Alpha Hydrox, it should be noted that the number
of competitive skin care products containing alpha hydroxy acids increased
during the year, particularly in the area of private label products, and may
continue to do so in the future. No assurance can be given that 1996 sales of
the Company's skin care products will exceed or be the same as those of 1995.

Sales of household chemical products decreased in 1995 vs. 1994, which, in
part, accounted for a lower percentage of consolidated net sales, 36.8% in 1995
compared to 40.7% in 1994. These products are comprised of Scott's Liquid Gold
for wood, a wood cleaner which preserves as it cleans, and Touch of Scent, a
room air freshener. During 1995, sales of household chemical products were
$19,050,100 compared to $21,732,100 in 1994, a decrease of $2,682,000 or 12.3 %.
Sales of Scott's Liquid Gold for wood were down by $784,800, a decrease of 7.5%,
and sales of Touch of Scent were down by $1,897,200 or 16.9 %. Advertising
expenditures for household chemical products during 1996 decreased by 54.4% when
compared to 1994. With regard to Touch of Scent, the Company is using a new
concentrated formula and is also testing a new variety of highly-decorative
dispensers in an effort to increase sales of its air fresheners in the future.

Net sales of ``Aquafilters'', a disposable cigarette filter, represented 2.1%
of consolidated net sales in 1995 compared to 2.0% in 1994. Such sales were
lower in 1995 than in 1994 by $8,000, a decrease of .7%. Over the last several
years, sales of Aquafilters have declined. The Company expends very little money
to advertise this product.

Cost of goods sold on a consolidated basis were $14,583,200 in 1995 compared
to $13,690,700 in 1994, an increase of 6.5%. As a percentage of consolidated net
sales, cost of goods sold increased from 25.6% in 1994 to 28.2% in 1995,
principally due to the following: (a) an increase in 1995 over 1994 of
manufacturing overhead of about $443,200, primarily due to an increase in
indirect labor (up $214,100, mostly in the areas of technical support/laboratory
and quality control) and in laboratory expenses other than salaries (up
$236,100), offset by a net decrease in various other overhead expenses, none of
which, by itself, was material, of about $7,200; (b) a decrease in plant
utilization in 1995 vs. 1994, particularly in the third quarter (in the third
quarter of 1994, the Company operated on a two-shift basis to produce certain
new Alpha Hydrox products to be sold into the market place during the fourth
quarter of that year and during the first quarter of 1995; further, plant
utilization suffered in 1995 from a decrease from 1994 levels due to lower
production demands for household chemical products); and (c) certain products
introduced during 1995, particularly Alpha Hydrox Body Wash which accounted for
11% of Alpha Hydrox sales during 1995, are list-priced to produce a gross margin
which is substantially lower than that of most other Alpha Hydrox products.
There were no sales of Body Wash products during 1994. Further, substantially
more pre-pack, display cases of Alpha Hydrox products were sold in 1995 than in
1994. Due to both higher labor content and costs of packaging materials, sales
of prepacks produce a lower gross margin than sales of products sold in 12-count
cases. An addition of plant facilities and equipment, as is described below
under `Liquidity and Capital Resources,'' will increase depreciation expense in
1996 by approximately $125,000 per year, which is expected to have little effect
on gross margins.

Advertising expenses for 1995 were $17,990,300 compared to $15,107,200 in
1994, an increase of $2,883,100 or 19.1%. Of this increase, $5,902,000 pertained
to cosmetic products and $10,100 pertained to Aquafilter products, both offset
by a decrease of $3,029,000 for household chemical products. During 1996, the
Company intends to maintain an aggressive advertising posture, while, at the
same time, decreasing, as a percentage of net sales, its advertising expenses
from 1995 levels. The Company believes that its 1996 advertising program will
not adversely affect its ability to reach its 1996 sales goals. As the year
progresses, the Company will consider adjusting its budgeted advertising
expenses based upon year-to-date consolidated net sales. The Company wishes to
make clear that, irrespective of the foregoing, it intends to spend significant
amounts in 1996 to advertise its cosmetics and household chemical products for
the following reasons: (i) it believes that, thus far, although industry-wide
sales of skin care products containing alpha hydroxy acids have been flat when
compared to 1994, the Company's penetration of the skin care market has been
modest and that future growth is, therefore, possible; (ii) without advertising
to educate the consuming public as to the merits of Alpha Hydrox, future growth,
although not assured by advertising, will be severely restricted; (iii)
competitive products continue to enter the marketplace and, accordingly, the
Alpha Hydrox name needs to be kept in front of current consumers; and (iv)
advertising is essential to maintain or increase sales levels of both the
Company's cosmetics and household chemical products. The Company recognizes that
sustaining its advertising program is highly dependent upon sales of its skin
care products.

Selling expenses for 1995 were $7,859,600 compared to $8,038,500 for 1994, a
decrease of $178,900 or 2.2%. Administrative expenses for 1995 were $6,440,300
compared to $6,504,800 in 1994, a decrease of $64,500 or 1.0%.

Interest expense for 1995 was greater than that of 1994 by $177,700, an
increase of 27.3%, which was due to higher borrowings and interest rates.
Interest expense will continue to increase during 1996 due to the issuance by
the Company in July of 1994 of 10% First Mortgage Bonds, the proceeds of which
were used to finance the Company's physical expansion as is described below
under Liquidity and Capital Resources. During the construction phase of this
expansion, which was completed in 1995, a portion of the amount of interest paid
was capitalized ($428,800 in 1995). Offsetting the increase in interest expense
for 1995 was $489,800 of interest earned, an increase over 1994 of $260,800,
which was the result of investing the proceeds of the bond issue and the
Company's excess cash in short-term Treasury Bills and similar paper.

Expenditures for research and development, irrespective of an increase in such
expenditures, were not material during 1995 (under 1% of revenues).

year ended December 31, 1994
compared to year ended December 31, 1993

Consolidated net sales for 1994 were $53.4 million vs. $37.7 million for 1993,
an increase of $15.7 million or 41.8%. Included in the aggregate sales increase
was $1,223,500 attributable to improved selling prices of cosmetics products (up
$ 213,800) and of household chemical products (up $1,009,700 of which $791,700
related to Scott's Liquid Gold wood care products).

During 1994, net sales of cosmetics products accounted for 57.3% of
consolidated net sales compared to 41.9% in 1993. Net sales of these products
for 1994 were $30.6 million compared to $15.8 million in 1993, an increase of
$14.8 million, or 93.7%. The Company attributes such increase to several
factors: extensive advertising of the Company's cosmetics line, competitive
pricing, the addition of five new products in May and three in December of 1994,
and the efficacy of the Company's products. Irrespective of the Company's
success during 1994, it was noted that, during that year, the number of
competitive skin care products containing alpha hydroxy acids increased
significantly and that additional competitive products may be introduced in the
future.

Net sales of household chemical products accounted for 40.7% of consolidated
net sales in 1994 compared to 54.8% in 1993. These products are comprised of
Scott s Liquid Gold for wood, a wood cleaner which preserves as it cleans, and
Touch of Scent, a room air freshener. During 1994, sales of household chemical
products were $21.7 compared to $20.6 million in 1993, an increase of $1.1
million or 5.2%. Sales of Scott's Liquid Gold for wood were up by $1.1 million,
an increase of 11.8%, and sales of Touch of Scent were up by $350,200 or 3.2%,
both offset by a decrease in sales of $385,700 pertaining to a discontinued
product.

Net sales of Aquafilters, a disposable cigarette filter, represented 2.0 % of
consolidated net sales in 1994 compared to 3.3% in 1993. Such sales were lower
in 1994 than in 1993 by $131,900, a decrease of 10.8%. Over the last several
years, sales of Aquafilters have declined. The Company expends no moneys in
advertising this product.

Cost of goods sold on a consolidated basis were $13.7 million in 1994 compared
to $11.7 million in 1993, an increase of 17.4%. For the most part, this increase
is the result of the Company's increase in sales volume. As a percentage of
consolidated net sales, cost of goods sold decreased from 31% in 1993 to 25.6%
in 1994, principally due to product mix which, in 1994, contained a higher
percentage of cosmetics products than in 1993. These products yield greater
gross margins than those produced by household chemical products.

Advertising expenses for 1994 were $15.1 million compared to $8.5 million in
1993, a increase of $6.6 million or 78.4%. Of this increase, 59% pertained to
household chemical products and 41% pertained to cosmetics products.

Selling expenses for 1994 were $8.0 million, compared to $7.2 million for
1993, increasing by $863,000 or 12.0%. Of that increase, $661,400 is
attributable to an increase in shipping expenses and sales commissions (which
vary with sales volume), $268,200 related to increased salaries, fringe benefits
and travel expenses of field personnel, and $144,400 pertained to increases in a
variety of other selling expenses, none of which, by itself, was material; all
offset by decreased couponing and slotting expenses of $211,000.

Administrative expenses for 1994 were $6.5 million compared to $5.2 million in
1993, an increase of $1.3 million, or 25.0%. Almost all of that increase
($1,245,000) pertained to an increase in the Company's accrual of profit sharing
and bonuses which is based upon pre-tax profits, and to increases in allowances
for bad debts ($129,700), offset by decreased legal and professional fees of
$70,500.

Interest expense for 1994 was greater than that of 1993 by $248,900, an
increase of 61.8%, which was due to higher borrowings and interest rates. Part
of the increase in interest was due to the issuance by the Company in July of
1994 of 10% First Mortgage Bonds, the proceeds of which were used to finance the
Company's physical expansion as is described below under Liquidity and Capital
Resources. During the construction phase of this expansion, a portion of the
amount of interest to be paid was capitalized ($68,200 in 1994). Partially
offsetting the increase in interest expense for 1994 was $229,000 of interest
earned, an increase over 1993 of $121,100, a portion of which resulted from
investing the proceeds of the bond issue in short-term Treasury Bills and
similar paper.

liquidity and capital resources

On July 29, 1994, the Company consummated a $12 million bond issuance to
finance the expansion of the Company's Denver facilities. This expansion,
necessitated by the growth of the Company's wholly-owned subsidiary, Neoteric
Cosmetics, Inc., manufacturer of Alpha Hydrox skin care products, included
construction of a 74,600 square foot office building, replacing a smaller,
existing office structure; and an additional 52,000 square feet of manufacturing
and warehouse space at an aggregate cost of approximately $13.65 million (up
from an estimated $12.9 million cost as reported in the Company's 1994 Annual
Report), including the cost of fixtures and equipment. Construction of the
project began in August of 1994 and was completed in January, 1996.

The net proceeds of the bond issue, after expenses (including an Underwriter's
commission of $360,000 and repayments of certain indebtedness) was $8,861,300,
which was deposited with Norwest Bank Colorado which serves as the Trustee under
the Bond Indenture. In conformity with the Registration Statement pertaining to
the bond issue, approximately $2,754,600 of the net proceeds was used to repay
certain of the Company's then indebtedness, including about $2.0 million to the
Company's then principal lender and $626,800 to the wife of the Company's
Chairman of the Board; and about $24,100 was used for other expenses related to
the bond issue. In addition to the foregoing, the Company paid out, from its own
cash reserves, approximately $240,000 for other expenses, primarily professional
fees, in connection with the bond issue. In accordance with the terms of the
Bond Indenture, the net proceeds of the bond issue were disbursed by the Trustee
over the construction period to cover building costs as such costs were incurred
and certified by the project's architect. Because the cost of the construction
project, including machinery and office furnishings, was approximately $13.65
million, the Company needed to generate, prior to completion of the project,
approximately $4.8 million from operations to pay for the entire project. Prior
to the close of 1995, all moneys held by the Trustee and earmarked for the
construction project had been paid out. Also, by December 31, 1995, the Company
had paid out approximately $4,425,000 from its accumulated cash reserves towards
the construction project, leaving a balance of about $375,000 to be paid in
1996.

Interest on the $12 million bond issue is payable semi-annually beginning on
January 1, 1995 at the rate of 10% per annum. (The January 1996 interest payment
was made in a timely manner.) A sinking fund payment of $1 million is required
annually, with a first payment in 1995. That requirement was fulfilled prior to
the end of 1995. Currently, the Company is voluntarily paying $183,333 each
month to the Trustee to cover future interest and sinking fund payments. The
Trustee, at the Company's request, holds such moneys in accounts to which the
Company has no access.

Among other things, the Bond Indenture requires that the Company maintain a
current ratio of at least 1.0:1 while the bonds are outstanding, and further
requires that the Company maintain a ratio of consolidated funded debt (reduced
by any amount held in the bond sinking fund) to consolidated net worth of not
more than 1.5:1. Both of the foregoing requirements were met at December 31,
1995. The Bond Indenture also states that the Company may not declare or pay any
dividend or distribution on its equity securities, purchase or otherwise acquire
securities of the Company, or incur any additional consolidated funded debt if,
after giving affect to the action, the ratio of consolidated funded debt
(reduced by amounts held in the bond sinking fund) to consolidated net worth
would exceed 1.25:1. The bonds are secured by a first deed of trust on the
Company's Denver land and buildings, including new structures financed by the
bond issuance. An independent appraisal conducted just prior to the issuance of
the bonds placed an aggregate market value of $16 million on this property,
assuming completion of the construction project.

During 1995, the Company's working capital decreased by $2,004,300, and
concomitantly, its current ratio (current assets divided by current liabilities)
decreased from 2.46:1 at December 31, 1994 to 1.83:1 at December 31, 1995. This
decrease in working capital is attributable to net income of $2,823,400,
contributions to the Company's ESOP and exercise of incentive stock options of
$438,400, a decrease in restricted cash of $6,162,700, a decrease in other
assets of $48,800, and an increase in deferred income taxes of $217,900; all
offset by capital expenditures in excess of depreciation of $9,714,200, the
declaration in March of 1995 of a dividend of $989,000, and a net reduction of
$992,300 in long-term debt. At December 31, 1995, the ratio of consolidated
funded debt to consolidated net worth was .63:1.

Trade accounts receivable at December 31, 1995 were lower by $1,670,100 than
those at December 31, 1994 primarily because net sales of December of 1994
exceeded those of December of 1995 by about $1.7 million. Trade accounts payable
are higher at December 31, 1995 than they were at December 31, 1994 by
$1,338,500. While some of that increase is due to the building of inventories of
the Company's new Alpha Hydrox foot care products, most is attributable to
slower payments by the Company to certain suppliers. Although relations with
suppliers remain satisfactory, the Company intends to reduce its trade accounts
payable early in 1996. Inventories at December 31, 1995 were higher than those
at December 31, 1994 by $778,600, an increase of 16.2% which is attributable to
new products and slow sales in December of 1995.

The Company's Board of Directors has adopted a dividend philosophy under which
the Board will consider periodically the payment of dividends which recognize
performance during 1996 if certain goals for net sales during a quarter and for
cumulative net sales during the year are satisfied. Such dividends, if declared,
will not exceed 50% of net income on a cumulative basis. However, in any event,
the Board of Directors' declaration of dividends is dependent upon the Company's
financial condition, cash needs, satisfaction of the bond covenants described
above and other relevant factors.

other

As described in earlier reports, on September 8, 1994, the United States
Justice Department, at the request of the United States Army, filed an
environmental lawsuit against the Company, alleging that the Company was a
contributor to contamination in a groundwater aquifer underlying a portion of
the Rocky Mountain Arsenal; and, therefore, that the Company should contribute
to the existing and future costs incurred by the Army in connection with
remediation of that groundwater. The Army claims to have incurred approximately
$27 million, exclusive of interest, of past response costs related to the
portion of the Arsenal in question. It asserts that one-half to two-thirds of
that amount should be allocated to the Company. The Army also claims
unquantified future response costs, including costs to acquire additional
supplies of water to supplement or replace existing municipal sources. These
costs have been estimated at $50 million. Based on the opinion and report of its
groundwater consultant, the Company believes that any contamination from the
Company has not migrated as far as the Arsenal and that the contamination at
issue comes from other sources. The Company believes, in addition, that
contaminant concentrations in a groundwater plume that the Army claims to have
originated at the Company's facilities (and which the Company believes
originated elsewhere) are such that any response costs actually incurred by the
Army relative to the disputed plume are relatively small. Further, the Company
believes that the need for additional or supplemental water supplies, if any,
results solely from the Arsenal's munitions operations and not from any
groundwater contamination to which the Army claims the Company contributed. An
exchange of expert reports by the parties concluded on March 1, 1996. Other
discovery is scheduled to be completed in the spring of 1996. No trial date has
been set. The Company strongly believes that the lawsuit is unjustified and is
mounting a vigorous defense.

The Company has notified both primary and excess liability insurance carriers
of the Army's claims. Some carriers have denied any obligation to defend or
indemnify the Company. Other carriers have reserved rights on a variety of
grounds (including a limited pollution exclusion which is currently the subject
of litigation around the country) but are participating in the defense of the
claims.

The Rocky Mountain Arsenal is a Superfund Site resulting from activities of
the United States Army and a major chemical company over many years. The Arsenal
was involved in the production and demilitarization of war materials, including
nerve gas, and the production of pesticides. Contaminants from these activities
were deposited in numerous spots at the Arsenal, affecting groundwater, surface
water, soil, air and wildlife. At one time, the Arsenal extended beyond its
present boundaries, encompassing land now part of Stapleton International
Airport. It is through this same land that the Army contends that contamination
flows from the Company's facility (under the Stapleton runways) some 4.5 miles
to the area in which a water treatment facility was built.

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
Year ended December 31,
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>

Revenues:
Net sales $51,758,500 $53,408,300 $37,671,400
Other income 498,200 237,200 118,000

________________________________________
52,256,700 53,645,500 37,789,400
Costs and expenses:
Cost of sales 14,583,200 13,690,700 11,658,500
Advertising 17,990,300 15,107,200 8,468,200
Selling 7,859,600 8,038,500 7,175,500
General and administrative 6,440,300 6,504,800 5,200,600
Interest 829,500 651,800 402,900
________________________________________
47,702,900 43,993,000 32,905,700

Income from operations before
income taxes 4,553,800 9,652,500 4,883,700
Provision for income
taxes (Note 5) 1,730,400 3,801,000 1,955,000
_______________________________________
Net income $2,823,400 $5,851,500 $2,928,700
=======================================

Net income per common share (Note :
Primary $ .28 $ .57 $ .30
Fully diluted $ .28 $ .57 $ .29
Primary weighted average number of
common shares outstanding 10,252,700 10,228,500 9,674,700
Fully diluted weighted average
number of common shares
outstanding 10,160,200 10,209,100 10,019,300
</TABLE>

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1995 1994
<S> <C> <C>

Current assets:
Cash and cash equivalents $4,761,500 $3,754,900
Trade receivables, less allowances
of $501,100 and $345,900
for doubtful accounts 3,076,500 4,746,600
Inventories (Note 2) 5,572,100 4,793,500
Prepaid expenses 431,000 654,000
Deferred tax assets (Note 5) 503,500 367,800
_______________________
Total current assets 14,344,600 14,316,800

Property, plant and equipment,
net (Notes 3 & 4) 20,575,500 10,861,300
Restricted cash - 6,162,700
Other assets 741,100 789,900
_______________________
$35,661,200 $32,130,700
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $3,347,100 $2,008,600
Accrued expenses 3,426,300 2,771,600
Current maturities of long-term
debt (Note 4) 1,074,600 1,035,700
_______________________
Total current liabilities 7,848,000 5,815,900
Long-term debt (Note 4) 10,474,300 11,466,600
Deferred income taxes (Note 5) 729,900 512,000
_______________________
19,052,200 17,794,500

Commitments and Contingencies (Notes 7 & 10)

Shareholders' equity (Note 6):
Common stock $.10 par value, authorized
20,000,000 shares: issued and
outstanding 10,030,900 and 9,763,800 1,003,100 976,400
Capital in excess of par 4,719,000 4,307,300
Retained earnings 10,886,900 9,052,500
_______________________
Shareholders' equity 16,609,000 14,336,200
_______________________
$35,661,200 $32,130,700
=======================
</TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31,

Increase (Decrease) in Cash and
Cash Equivalents 1995 1994 1993

Cash flows from operating activities:
Net income $2,823,400 $5,851,500 $2,928,700

Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 908,000 683,600 728,700
Provision for doubtful
accounts receivable 229,000 174,400 44,400
Compensation expense of
employee stock plans 255,700 208,800 202,900
Change in assets and liabilities:
Accounts receivable 1,441,100 (2,252,200) (1,300,200)
Inventories (778,600) (1,223,200) (712,600)
Prepaid expenses 223,000 (33,900) (259,400)
Other assets (36,700) (822,600) (14,000)
Deferred income taxes 82,200 (25,800) (2,000)
Accounts payable and
accrued expenses 1,993,200 686,000 1,786,100
____________________________________
Total adjustments to net income 4,316,900 (2,604,900) 473,900

Net Cash Provided by
Operating Activities 7,140,300 3,246,600 3,402,600

Cash flows from investing activities:
Purchases of property,
plant and equipment (10,536,700) (4,152,600) (474,100)

Net Cash Used by
Investing Activities (10,536,700) (4,152,600) (474,100)

Cash flows from financing activities:
Proceeds from exercise of
stock options 182,700 259,000 2,600
Proceeds from short-term borrowings 154,700 103,300 55,400
Principal payments on short-term
borrowings (154,700) (203,300) (55,400)
Proceeds from long-term borrowings 111,400 12,009,900 1,078,000
Principal payments on
long-term borrowings (35,700) (3,219,500) (2,073,800)
Increase in bond sinking fund (1,029,100) - -
Decrease (increase) in
restricted cash 6,162,700 (6,162,700) -
Dividends paid (989,000) (954,600) -

Net Cash Provided (Used)
by Financing Activities 4,403,000 1,832,100 (993,200)

Net Increase in Cash and
Cash Equivalents 1,006,600 926,100 1,935,300

Cash and Cash Equivalents,
beginning of year 3,754,900 2,828,800 893,500

Cash and Cash Equivalents,
end of year $ 4,761,500 $3,754,900 $2,828,800

Supplemental disclosures:
Cash paid during the year for:
Interest (net of $428,800 and
$68,200 capitalized in 1995
and 1994 respectively) $829,500 $669,600 $413,900
Income taxes $1,231,400 $3,772,800 $1,004,500

</TABLE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

Capital Retained
Years ended December 31, Common Stock in Excess Earnings
1995, 1994 and 1993 Shares Amount of Par (Deficit)
<S> <C> <C> <C> <C>

Balance January 1, 1993 9,148,800 $914,900 $3,695,500 $ 1,226,900
Net income - - - 2,928,700
Stock issued to employee
stock ownership trust 164,000 16,400 186,500 -
Other stock issuances 4,500 400 2,200 -

Balance December 31, 1993 9,317,300 931,700 3,884,200 4,155,600
Net income - - - 5,851,500
Dividend - - - (954,600)
Stock issued to employee stock
ownership trust 50,200 5,000 203,800 -
Other stock issuances 396,300 39,700 219,300 -

Balance December 31, 1994 9,763,800 976,400 4,307,300 9,052,500
Net income - - - 2,823,400
Dividend - - - (989,000)
Stock issued to employee stock
ownership trust 45,400 4,500 251,200 -
Other stock issuances 221,700 22,200 160,500 -

Balance December 31, 1995 10,030,900 $1,003,100 $4,719,000 $10,886,900
</TABLE>

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Certain reclassifications have been made in the 1994 and 1993
Consolidated Financial Statements to conform to the classifications used in the
current year.

The Company manufactures and markets household chemical products (36.8% of
net sales), skin care products (61.1%) and cigarette filters (2.1%). The
Company's products are sold nationally, directly and through independent
brokers, to mass marketers, drugstores, supermarkets, wholesale distributors
and other retail outlets.

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

Property, plant and equipment are recorded at historical costs. Depreciation
is provided using the straight-line method over estimated useful lives of the
assets ranging from 3 to 45 years.

The Company considers all highly liquid investments with a maturity of three
months or less at the date of acquisition to be cash equivalents.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.

NOTE 2: Inventories

Inventories consisting of materials, labor and overhead at December 31 were
comprised of the following:
<TABLE>
<CAPTION>
1995 1994

<S> <C> <C>
Finished goods $3,402,100 $2,714,000
Raw materials 2,170,000 2,079,500
__________________________
$5,572,100 $4,793,500
</TABLE>

NOTE 3: Property, Plant and Equipment

Property accounts at December 31 were comprised of the following:

<TABLE>
<CAPTION>
1995 1994

<S> <C> <C>
Land $1,254,600 $1,254,600
Buildings 14,067,700 4,874,200
Production equipment 6,794,900 6,677,500
Office furniture and equipment 2,760,600 1,840,200
Other 331,500 253,300
Construction in progress 3,616,100 3,640,300
____________________________

28,825,400 18,540,100

Less accumulated depreciation 8,249,900 7,678,800
____________________________
$20,575,500 $10,861,300
============================
</TABLE>

Construction of a new office building and additions to the manufacturing
and warehouse facilities began in the late summer of 1994. Construction on
the office building was completed in June 1995 and construction on the
manufacturing and warehouse facilities were completed in January 1996.
During 1995 and 1994, $428,800 and $68,200 of interest was capitalized
respectively.

NOTE 4: Long-Term Debt

Long-term debt at December 31, also described in Management's Discussion
and Analysis of Liquidity and Capital Resources, is presented below:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
First mortgage bonds secured by Denver land
and buildings, due 2001, interest at 10%
payable semi-annually with sinking fund
requirement of $1 million per year beginning
December 31, 1995 $12,000,000 $12,000,000
Bond sinking fund (1,029,100) -
First mortgage on Aquafilter land and
building, payable in monthly installments
through 1999, interest at 9.75% 466,600 502,300
Installment note on certain data
processing equipment and software,
payable in monthly installments through
1998, interest at 4.9% 111,400 -
____________________________
11,548,900 12,502,300

Less current maturities 1,074,600 1,035,700
____________________________
$10,474,300 $11,466,600
============================
</TABLE>

Maturities of long-term debt for the years 1996 through 2000 are respectively:
$1,074,600, $1,080,400, $1,086,700, $1,336,200, $1,000,000 and $5,971,000
maturing after 2000. See Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operation.

NOTE 5: Income Taxes

The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, ``Accounting for
Income Taxes''.

The provisions for income taxes include the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Currently payable:
Federal $1,480,100 $3,256,800 $ 1,665,000
State 168,100 570,000 292,000
_______________________________________
Total currently payable 1,648,200* 3,826,800* 1,957,000*

Deferred
Federal 74,000 24,200 57,000
State 8,200 (50,000) (59,000)
______________________________________
Total deferred 82,200 (25,800) (2,000)

Provision
Federal 1,554,100 3,281,000 1,722,000
State 176,300 520,000 233,000
______________________________________
Total provision $1,730,400 $3,801,000 $1,955,000

</TABLE>
*Estimated payments of approximately $1,044,000, $3,275,000 and $1,000,000
were made as of December 31, 1995, 1994 and 1993 respectively for this
liability.

The Company's effective income tax rate was different than the statutory
federal income tax rate as follows:

1995 1994 1993
<S> <C> <C> <C>
Federal income tax at
statutory rates $1,548,300 $3,282,000 $1,661,000
State income taxes,
net of federal tax effect 176,300 385,000 234,000
Other 5,800 187,000 221,000
__________________________________________
Total 1,730,400 3,854,000 2,116,000
Tax credits - 53,000 161,000
__________________________________________
Effective tax $1,730,400 $3,801,000 $1,955,000

</TABLE>

The 1993 income tax provision included an amount related to items under
review by the Internal Revenue Service.

Deferred taxes are determined based on estimated future tax effects of
differences between the amounts reflected in the financial statements
and the tax basis of assets and liabilities given the provisions of the
enacted tax laws. The net deferred tax assets and liabilities as of
December 31, 1994 and 1995 along with the changes during the fiscal year
are comprised of the following:
<TABLE>
<CAPTION>

1994 1995
<S> <C> <C>
Current:
Allowance for
uncollectible accounts $115,000 $173,800
Inventory reserves and other 108,000 115,700
Prepaid insurance - 33,500
Accrued vacation 123,000 159,300
Deferred slotting - -
State taxes 26,000 -
Other reserves 31,000 -
Other (35,200) 21,200
_______________________
Net current deferred tax assets $367,800 $503,500
Noncurrent:
Accelerated depreciation
for tax $(661,000) $(793,000)
Subsidiary start-up costs 84,000 50,000
Tax credits 12,000 13,100
Other 53,000 -
_______________________
Total noncurrent deferred
tax liability $(512,000) $(729,900)

</TABLE>
At December 31, 1995 the Company has no federal tax credit carryforwards.
The Company has state income tax credits of $13,100 expiring over a period
ending in 2010.

A reconciliation of the Company's income before taxes for financial
statement purposes to taxable income is as follows:

<TABLE>
YEAR ENDED DECEMBER 31,
<CAPTION>

1995 1994 1993
<S> <C> <C> <C>
Income before income taxes $4,553,800 $9,652,500 $4,883,700
Differences between income
before income taxes and taxable income:
State income taxes (176,300) (173,900) (30,400)
Permanent differences 15,300 12,700 6,900
Net changes in
temporary differences (136,900) 238,000 (2,700)
____________________________________
(297,900) 76,800 (26,100)
====================================
Federal taxable income $4,255,900 $9,729,300 $4,857,500
</TABLE>

NOTE 6: Common Stock

In 1981 and 1986 , the directors adopted incentive stock option plans for
Company employees and, in 1993, adopted a non-qualified stock option plan for
the outside directors (subsequently approved by shareholders) which permit the
Company to grant options up to an aggregate of 1,650,000 shares of common
stock. Options are granted at not less than fair market value of the stock at
the date of grant and are exercisable from the grant date for five years. The
1981 plan expired in 1991 and, accordingly no shares are available for option
under that Plan.

<TABLE>
1981 PLAN 1986 PLAN 1993 PLAN
<CAPTION>
AVERAGE AVERAGE AVERAGE
NUMBER OPTION PRICE NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE OF SHARES PER SHARE

<S> <C> <C> <C> <C> <C> <C>
Maximum number
of shares
at inception
of plans 750,000 500,000 400,000
===========================================================================

Outstanding,
December 31,1992 499,000 $ .60 13,000 $ 1.07 - -
Granted in 1993 - - 248,000 1.79 255,000 $1.48
Exercised (4,000) .58 (500) . 64 - -
Cancelled - - (1,500) . 78 - -
___________________________________________________________________________
Outstanding,
December 31,1993 495,000 $ .60 259,000 $ 1.77 255, 000 $1.48
Granted in 1994 - - 180,300 5.34 135,000 $4.88
Exercised (372,800) .60 (23,500) 1. 48 - -
Cancelled - - - - - -
__________________________________________________________________________
Outstanding,
December 31,1994 122,200 $ .60 415,800 $ 3.29 390, 000 $2.65
Granted in 1995 - - - - - -
Exercised (121,700) .58 - - (100, 000) $1.10
Cancelled (500) .58 (1,500) 3.80 - -
__________________________________________________________________________
Outstanding,
December 31,1995 - - 414,300 $ 3.29 290,000 $3.19
==========================================================================

Available for option,
December 31, 1995 - 61,200 10,000
==========================================================================

</TABLE>

The Company has an Employee Stock Ownership Plan to provide retirement
benefits for its employees. The Plan is designed to invest primarily in common
stock of the Company and is non-contributory on the part of the Company's
employees. Contributions to the plan are discretionary as determined by the
Company's Board of Directors. The Company expenses the cost of shares issued
to the Plan. The amount expensed for the Plan in 1995, 1994 and 1993 was
$255,700, $208,800 and $202,900 respectively. During 1995, 1994 and 1993, the
Company contributed 45,400 shares, 50,200 shares and 164,000 shares
respectively to the Employee Stock Ownership Plan.

Per share data for all years presented was determined by using the weighted
average number of common and common equivalent shares outstanding. Common
equivalent shares, determined by using the treasury stock method, result from
stock options with exercise prices that are below the average market price of
the common stock.

On April 7,1995, the Company paid a dividend of $.10 per share (aggregate
$989,000) to shareholders of record on March 24, 1995. On March 15, 1994, the
Company paid a dividend of $.10 per share (aggregate $954,600) to shareholders
of record on March 7, 1994.

NOTE 7: Lease Commitments

The Company has certain short-term rental arrangements for office equipment
and other items. Aggregate rental expense for these items was as follows:

1995 1994 1993
<S> <C> <C> <C>

$ 87,500 $ 65,900 $ 48,300
==========================================
</TABLE>

NOTE 8: Significant Customer

In 1995, 1994 and 1993 one customer, Wal-Mart Stores, Inc. of Bentonville,
Arkansas, accounted for approximately 22.6%, 21.5% and 21.7% respectively of
the Company's sales of household chemical products and 22.0%, 20.9% and 18.6%
respectively of the Company's sales of skin care products. This customer is
not related to the Company. A loss of this large customer would have a
material effect on the Company if the Company's consumer base served by that
customer did not purchase the Company's products at other retail outlets. No
long-term contracts exist between the Company and Wal-Mart Stores, Inc. or any
other customer.

NOTE 9: Transactions With Related Parties

During 1995, the Company paid a consulting fee of $60,000 to Dr. Norman
Brooks ($40,000 was paid in 1994) in connection with the development of its
cosmetic products. Dr. Brooks' wife is the daughter of Jerome J. Goldstein and
the sister of Mark E. Goldstein.

The Company has adopted a bonus plan for its executive officers for the year
1996. The Plan provides that an amount will be distributed to the Company's
executive officers equal to 10% of the annual before tax profit exceeding
$1,000,000. In 1995, $416,400 was accrued or paid under the Plan. In 1994,
$1,024,600 was accrued or paid under the Plan and in 1993, $452,000 was
accrued or paid under the Plan.

NOTE 10: Contingent Liabilities

In September 1994, the United States Justice Department, at the request of
the United States Army, brought an environmental lawsuit against the Company.
The suit alleges that the Company was a contributor to contamination in a
groundwater aquifer underlying a portion of the Rocky Mountain Arsenal, a
Superfund Site contaminated by the U.S. Army and a major chemical company over
many years; and, therefore, that the Company should contribute to the existing
and future costs incurred by the Army in connection with the remediation of
that groundwater. The Army claims to have incurred approximately $27 million,
exclusive of interest, of past response costs related to the portion of the
Arsenal in question. It asserts that one-half to two-thirds of that amount
should be allocated to the Company. The Army also claims unquantified future
response costs, including costs to acquire additional supplies of water to
supplement or replace existing municipal sources. These costs have been
estimated at $50 million. Based on the opinion and report of its groundwater
consultant, the Company believes that any contamination from the Company has
not migrated as far as the Arsenal and that the contamination at issue comes
from other sources. The Company believes, in addition, that contaminant
concentrations in a groundwater plume that the Army claims to have originated
at the Company's facilities (and which the Company believes originated
elsewhere) are such that any response costs actually incurred by the Army
relative to the disputed plume are relatively small. Further, the Company
believes that the need for additional or supplemental water supplies, if any,
results solely from the Arsenal munition operations and not from any
groundwater contamination to which the Army claims the Company contributed.
The Company strongly believes that the lawsuit is unjustified and is mounting
a vigorous defense.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of Scott's Liquid Gold-Inc.

We have audited the accompanying consolidated balance sheets of Scott's
Liquid Gold-Inc. (a Colorado Corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1995. 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 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 financial positon of Scott's Liquid
Gold-Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

/s/ Arthur Anderson LLP
Denver, Colorado
January 15, 1996

CORPORATE DATA

Plant and Executive Offices
Scott's Liquid Gold-Inc., 4880 Havana Street, Denver, Colorado 80239
Phone 303-373-4860

Stock Transfer Agent
Norwest Bank Minnesota N.A., 161 N. Concourse Exchange, South St. Paul,
Minnesota 55075-0738

Shareholders
As of February 17, 1995 the Company had approximately 1500 shareholders of
record.

Market Information

The high and low prices or bid quotations of Scott's Liquid Gold-Inc. common
stock as traded on the New York Stock Exchange as of November 23, 1994, and
prior to that date, on NASDAQ or NASDAQ/NMS, were as follows:

<TABLE>

Three Months Ended 1993
High Low

<S> <C> <C>
March 31 11/4 7/8
June 30 13/8 15/16
September 30 35/8 13/16
December 31 43/16 23/4

Three Months Ended 1994
High Low

March 31 9 3-5/8
June 30 7-3/4 3-3/8
September 30 7-3/8 3-3/4
December 31 6-11/16 3-7/8

</TABLE>

NYSE Symbol: SGD

The above quotations prior to November 23, 1994 represent prices between
dealers, and do not include retail mark-up or commissions, nor do they represent
actual transactions.

In March 1994, the Company paid its first cash dividend to shareholders in the
amount of $.10 per share of common stock. This dividend was based upon the
Company's performance in 1993. On March 7, 1995, based upon 1994's performance,
the Company declared a dividend of $.10 per share to shareholders of record on
March 24, 1995. No decision has been made as to future dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" for information concerning
restrictions on dividends.

DIRECTORS AND OFFICERS

JEROME J. GOLDSTEIN
Chairman of the Board and Director

MARK E. GOLDSTEIN
President, Chief Executive Officer and Director

CAROLYN J. ANDERSON
Executive Vice President, Chief Operating Officer,
Corporate Secretary and Director

BARRY SHEPARD
Treasurer, Assistant Secretary, Chief Financial
Officer and Director

MICHAEL J. SHEETS
Principal, Gerald Schoenfeld, Inc., Consultant and Director,
New York City, NY

DENNIS H. FIELD
Independent Consultant and Director, Short Hills, NJ

JAMES F. KEANE
President, Engine World, Inc., and Director, Hudson, MA

EXHIBIT 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Form S-8 Registration Statement No. 33-63254.

POWER OF ATTORNEY

Each of the undersigned directors and/or officers of
Scott's Liquid Gold-Inc. (the "Company") hereby authorizes Mark E. Goldstein,
Carolyn J. Anderson and Barry Shepard, and each of them, as their true and
lawful attorneys-in-fact and agents (1) to sign in the name of the undersigned
and file with the Securities and Exchange Commission the Company's annual report
on Form 10-K, for the fiscal year ended December 31, 1995, and any amendments to
such annual report; and (2) to take any and all actions necessary or required in
connection with such annual report to comply with the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.

Signature Title Date

/s/ Jerome J. Goldstein Director and Chairman of
the Board 2/27/96
Jerome J. Goldstein

/s/ Mark E. Goldstein Director, President and 2/27/96
Mark E. Goldstein Chief Executive Officer

/s/ Carolyn J. Anderson Director, Executive Vice
President 2/27/96
Carolyn J. Anderson Chief Operating Officer and
Corporate Secretary

/s/ Barry Shepard Director, Treasurer and
Chief 2/27/96
Barry Shepard Financial Officer

/s/ Dennis H. Field Director 2/27/96
Dennis H. Field

/s/ James F. Keane Director 2/27/96
James F. Keane

/s/ Michael J. Sheets Director 2/27/96
Michael J. Sheets

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Scott's
Liquid Gold-Inc. 1995 10-K and is qualified in its entirety by reference to such
10-K.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> $ 4,761,500
<SECURITIES> 0
<RECEIVABLES> $ 3,577,600
<ALLOWANCES> 501,100
<INVENTORY> $ 5,572,100
<CURRENT-ASSETS> $14,344,600
<PP&E> $28,825,400
<DEPRECIATION> $ 8,249,900
<TOTAL-ASSETS> $35,661,200
<CURRENT-LIABILITIES> $ 7,848,000
<BONDS> $12,000,000
<COMMON> $ 1,003,100
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> $35,661,200
<SALES> $51,758,500
<TOTAL-REVENUES> $52,256,700
<CGS> $14,583,200
<TOTAL-COSTS> $47,702,900
<OTHER-EXPENSES> $32,290,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $ 829,500
<INCOME-PRETAX> $ 4,553,800
<INCOME-TAX> $ 1,730,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $ 2,823,400
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28

</TABLE>