CONFORMED COPY

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  Form 10-KSB

                      ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2000
Commission File Number 0-4728

                 Arrow-Magnolia International, Inc.
            (Name of Small Business Issuer in its Charter)

			Texas				        75-0408335
     (State or other jurisdiction 		        (I.R.S. Employer
  of incorporation or organization)	              Identification No.)

		2646 Rodney Lane, Dallas, Texas 		    	75229
	 (Address of principal executive offices)	           (Zip Code)

Issuer's  telephone number, including area code:  (972) 247-7111
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share

	Check whether the issuer: (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 issuer was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.  Yes  ( x )    No (    )

	Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and no disclosure will 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-KSB or any
amendment of this Form 10-KSB.   (    )

	Issuer's revenues for the fiscal year ended December 31, 2000 were:
$14,193,264

	The aggregate market value of the registrant's voting stock held by non-
affiliates as of December 31, 2000 was:  $2,695,226 (* see note on index
page).

	The number of shares outstanding of each class of registrant's common
stock as of December 31, 2000 was:  Common Stock, par value $0.10 per share,
3,248,566 shares.
___________________
Documents Incorporated by Reference

	Portions of the registrant's definitive proxy statement to be furnished
to stockholders in connection with its Annual Meeting of Stockholders to be
held on May 10, 2001 are incorporated by reference in Part III of this Form
10-KSB.

	Transitional Small Business Disclosure Format:  	Yes      No    X

 <PAGE>


	                 ARROW-MAGNOLIA INTERNATIONAL, INC.
	                   ANNUAL REPORT ON FORM 10-KSB
	                           INDEX
Securities and Exchange Commission
Item Number and Description              					Page

	                           PART I

Item 1.   Description of Business..................................  1
Item 2.   Description of Property..................................  2
Item 3.   Legal Proceedings........................................  2
Item 4.   Submission of Matters to a Vote of Security-Holders......  3

	                           PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.  3
Item 6.   Management's Discussion and Analysis or Plan of Operation  4
Item 7.   Financial Statements.....................................  5
Item 8.   Changes in and Disagreements With Accountants on Accounting
	    and Financial Disclosure.................................  5

	                           PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
	    Compliance with Section 16(a) of the Exchange Act........  6
Item 10.  Executive Compensation...................................  6
Item 11.  Security Ownership of Certain Beneficial Owners and
          Management ..............................................  6
Item 12.  Certain Relationships and Related Transactions...........  6
Item 13.  Exhibits and Reports on Form 8-K.........................  6

Index To Financial Statements and Schedules.........................  F-1

Signatures..........................................................


       *	The figure indicated on the cover page as to the aggregate market
value of shares of issuer's voting stock held by nonaffiliates, as such figure
relates to shares held by affiliates, represents the issuer's best good faith
estimate for purposes of this annual report on Form 10-KSB and for no other
purpose.  The aggregate market value indicated is based upon the last sales
price of the issuer's common stock as reported by the NASDAQ SmallCap Market
as of the last trading day of the year, December 29, 2000.  See "Market for
Common Equity and Related Stockholder Matters."

<PAGE>


                      ARROW-MAGNOLIA INTERNATIONAL, INC.
	                    Form 10-KSB Annual Report
	                    For the Fiscal Year Ended
	                      December 31, 2000

	                             PART I

ITEM 1. DESCRIPTION OF BUSINESS.

	Arrow-Magnolia International, Inc., a Texas corporation (the "Company"
or "Arrow-Magnolia"), was incorporated in the State of Texas in 1937.

	The Company's business consists primarily of the manufacture and
distribution of approximately 400 specialty chemical products for use in
cleaning and maintaining equipment and general maintenance and sanitation.
The Company's manufacturing operations blend, to the Company's specifications
and according to the Company's procedures, a variety of chemicals to create
the Company's products. The Company packages products that it blends or
manufactures and, in addition, purchases products that have been blended or
manufactured and then packaged under the Company's private labels by third
parties. The Company's products are marketed throughout the United States,
Canada and other countries to a variety of consumers. No single customer
accounted for as much as 10% of its total net sales during 2000, 1999 or 1998.

	The Company's product line includes aircraft coatings, cleaners,
corrosion preventatives, degreasers and air fresheners; construction chemicals
such as release agents, concrete strippers, safety solvents, custom lubricants
and rust reconverters; and telecommunication formulations such as refinishers,
cable cleaners, graffiti removers and fiber optic lubricants.  Sanitation and
maintenance products sold by the Company include soaps, enzymes, deodorants,
germicides, insecticides, disinfectants and miscellaneous janitorial supplies.
The Company's products are designed and packaged for large-scale users rather
than individual household consumers.

	The Company currently manufactures certain of its products in order to
give the Company greater control over its inventory in terms of quality and
availability of goods. Cost savings are also effected through elimination of
outside vendor overhead and profit and through reductions in the cost of
carrying finished goods inventory versus raw materials. Currently the Company
manufactures approximately 60% of its products (measured by 2000 sales
expressed in dollars).  The raw materials necessary for manufacture of the
Company's products and the finished products resold by the Company are readily
available from numerous sources and the Company is not dependent on any
particular supplier for these items.

	The Company markets its products primarily through its own sales
personnel consisting of ten sales managers and independent contractors (80
persons) and distributors (12 companies).  In addition, the Company exhibits
its products at national and international trade shows. The Company attends,
on a regular basis, major trade shows annually.  The Company has no material
backlog of orders for its products.

	During 2000, the Company learned for the first time that the soil and
groundwater underlying its facility in Dallas, Texas had been impacted
historically, prior to 1985 when present management assumed control of the
Company, with chemicals regulated under the environmental laws.    The extent
of the contamination is not yet known, and the Company has notified the Texas
Natural Resources Conservation Commission ("TNRCC") that it intends to apply
for the Voluntary Cleanup Program offered by the TNRCC.  After the Company
enters the program, it will cause additional studies to be performed to
delineate the extent of the chemicals and to determine whether any remediation
will be necessary and its nature and extent.  The Company has begun reserving
$2,000 per month in anticipation of the cost of the additional studies.

<PAGE>

Competition

	The business of the Company is highly competitive in all of its phases.
However, the industry in which the Company competes is very fragmented and,
although two companies are significantly larger than other companies engaged
in this industry, no single firm or group of firms dominates the industry as a
whole.  Further, the total sales volume of the Company's products constitutes
only a very small portion of the total available market.

	The principal methods of competition in the business of the Company are
sales personnel, price, quality and delivery capability. The Company competes
with numerous other companies, both domestic and foreign, and with major
chemical companies that have many products that are substantially similar to
those sold by the Company.  Due to the substantial similarity in available
products and technology, product differentiation and preference is largely a
function of the sales effort.  Management therefore believes that the Company
is able to compete successfully whenever it maintains aggressive sales
personnel.

	To the best knowledge of the Company's management, the Company is the
only distributor of several products which are specially formulated to the
Company's specifications for the particular applications of the
telecommunications industry. There is no assurance, however, that other
manufacturers will not enter the market in the future.

Employees

	As of December 31, 2000, the Company employed fifty (50) full-time
employees, including its warehouse personnel and administrative, accounting,
clerical and sales personnel. In addition, the Company retained the services
as independent contractors of eighty (80) sales representatives.  None of the
Company's employees are covered by union contracts, and the Company considers
its relationship with its employees to be excellent.

ITEM 2.   DESCRIPTION OF PROPERTY.

	The principal executive and warehouse facilities of the Company are
located in a steel, glass, brick and concrete building owned by the Company at
2646 Rodney Lane, Dallas, Texas. These facilities occupy approximately 70,000
square feet of floor space, of which 60,000 square feet are devoted to
warehousing and shipping and manufacturing, and 10,000 square feet to
administrative and executive offices.

	The Company believes that all of its plant and office facilities are in
good condition and adequately insured.

	The Company does not as a regular aspect of its business acquire
interests in real estate for purposes of investment or acquire securities of
or interests in persons engaged in real estate activities.

ITEM 3.   LEGAL PROCEEDINGS.

	Other than as described below, the Company is not a party to, nor is any
of its property the subject of, any legal proceedings other than routine
litigation incidental to its business.

	On May 21, 1999, the Company and three of its employees were named as
defendants in an action filed by Parkway Research Company in the 189th
Judicial District Court of Harris County, Texas.  The plaintiff alleges that
the Company hired the defendant employees and obtained from them confidential
and proprietary information of the plaintiff, encouraged other employees to
leave the employ of plaintiff and made claims concerning the Company's
products that caused confusion regarding the plaintiff's products.  The
plaintiff seeks unspecified actual plus punitive damages and attorneys' fees.
The Company denies these claims and its insurer is providing a defense.

                                         2
<PAGE>

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

	No matters were submitted during the fourth quarter of the fiscal year
ended December 31, 2000, to a vote of the Company's security holders, through
solicitation of proxies or otherwise.


PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

	The Company's common stock is included for quotation on the NASDAQ
SmallCap Market tier of the NASDAQ Stock Market under the trading symbol
"ARWM".  The following table sets forth the high and low sales prices in the
common stock during the last eight quarters reported in that market as
adjusted for 10% stock dividends which became effective July 15, 1999:


<TABLE>
<S>                              <C>              <C>

Fiscal 2000                     High             Low
-----------                     ----             ----
  Fourth Quarter                $4.31            $1.50
  Third Quarter                  4.50             2.06
  Second Quarter                 4.00             1.75
  First Quarter                  3.81             2.00

Fiscal 1999
-----------
  Fourth Quarter	              $4.44            $1.94
  Third Quarter                  4.00             3.00
  Second Quarter                 4.21             3.24
  First Quarter                  4.21             3.41


</TABLE>


	The approximate number of record holders of the Company's Common Stock
as of December 31, 2000, was 350.

	The Company has paid no cash dividends with respect to its Common Stock
since 1988, when it paid a dividend of $0.05 per share.  The Company currently
intends to retain any earnings for use in its business and does not anticipate
paying any cash dividends in the foreseeable future.




                                          3
<PAGE>



ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

	The following table sets forth for the periods indicated the relative
percentages that certain items included in the consolidated statements of
income bear to net sales and the percentage changes of such items as compared
to the indicated prior period:

<TABLE>


                                                           Increase (Decrease)
                                                           From Prior Period
                                                           Years Ended
                             Percentage of Net Sales       ------------------
                             Years Ended December 31       2000      1999
                             ------------------------       vs.       vs.
                             2000     1999     1998        1999      1998
                             ----     ----     ----        ----      ----

<S>                          <C>        <C>      <C>       <C>        <C>
Net sales                    100.0%   100.0%   100.0%      1.4%       1.7%
Cost of sales                 56.1%    57.2%    56.1%     (0.5)%      3.7%
Gross profit                  43.9%    42.8%    43.9%      3.8%      (0.9)%
General and administrative
  expenses                    34.6%    31.9%    30.5%     10.1%       6.2%
Income before other income
  (expense)                    9.3%    11.0%    13.4%    (14.3)%    (16.9)%
Income before income taxes    10.4%    11.8%    13.6%    (10.7)%    (12.4)%
Net income                     6.7%     7.5%     8.8%     (9.3)%     (13.2)%

</TABLE>

Comparison of Annual Results.

	Net sales for fiscal year 2000 increased 1.4% to $14,193,264 from
$14,001,716 versus fiscal year 1999 after increasing 1.7% from fiscal 1998 to
fiscal 1999.  Cost of sales as a percentage of net sales decreased to 56.1% in
fiscal 2000 from 57.2% in fiscal 1999 and 56.1% in fiscal 1997.  The increase
in sales from 1998 to 2000 is primarily attributable to the extension of sales
coverage through the addition of sales personnel under an ongoing hiring
program. As a result of increased hiring and training expenses associated with
the addition of these sales personnel, gross profit increased by 3.8% to
$6,227,676 from $5,996,902 for fiscal 2000 versus fiscal 1999, after
decreasing by 0.9% from fiscal 1998 to fiscal 1999.

	General and administrative expenses rose to 34.6% of net sales in fiscal
2000 primarily as the result of expenses associated with hiring additional
sales personnel, such as increased travel expense, and substantial one-time
expenses in the fourth quarter related to a proposed acquisition of the
Company that was terminated. General and administrative expenses also
increased as a percentage of net sales to 31.9% in fiscal 1999 from 30.5% in
fiscal 1998.  In addition to hiring additional sales personnel, during fiscal
1998 the Company increased its reserve for bad debts to 4.0% of net sales from
2.2% of net sales.

	Other income generated $153,596 in income in fiscal 2000, $110,766 in
income during fiscal 1999 and $31,958 in income during fiscal 1998, primarily
as the result of interest earned on excess cash in excess of interest paid.

	As a result of these factors, for the fiscal year ended December 31,
2000, net income fell to $950,918 versus  $1,048,062 for fiscal 1999 and
$1,207,280 for fiscal 1998.

                                     4
<PAGE>

Liquidity and Capital Resources.

	The Company's working capital (total current assets less total current
liabilities), which was $5,484,646 as of December 31, 1999, improved modestly
to $5,567,925 as of December 31, 2000.  The Company's current assets increased
as the Company's accounts receivable increased due to a slight increase in the
average collection period for the Company's receivables.  Current liabilities
increased due to the addition of equipment, such as sprayers, used to support
sales and the resulting increase in accounts payable.

	As shown in the Company's statements of cash flows for 2000, the Company
generated $955,885 in cash flow from operations as the Company continued to
capitalize on its profitability, partially offset by increases in receivables
resulting from its sustained growth.  The Company utilized $1,156,566 in
investing activities as it purchased property and equipment, primarily related
to the construction of an additional 30,000 square feet of warehouse space to
its existing facilities at a total cost of approximately $1 million.

	At December 31, 2000, the Company had $1,250,000 available under a
revolving line of credit bearing interest at the lender's prime rate (9.5% at
December 31, 2000) and is collateralized by certain accounts receivable and
inventories.  At December 31, 2000, there was no outstanding balance under
this note.  The credit agreement contains various debt covenants, the most
restrictive of which requires the Company to maintain certain minimum
financial criteria.  The Company believes it was in compliance with all debt
covenant requirements as of December 31, 2000.   The Company believes that its
present financing is adequate for its capital needs for the foreseeable
future.


ITEM 7.   FINANCIAL STATEMENTS.

	Included at pages F-1 through F-16 hereof.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

	None.

                                    5
<PAGE>

                                  PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

	Information relating to the Company's Directors and executive officers
will be set forth under the heading  "Election of Directors and Information as
to Directors, Nominees and Executive Officers" in the Company's definitive
proxy statement relating to the Company's Annual Meeting of Stockholders to be
held May 10, 2001, which will be filed with the Securities and Exchange
Commission on or about April 10, 2001, and such information is incorporated
herein by reference.


ITEM 10.  EXECUTIVE COMPENSATION

	Information relating to executive compensation will be set forth under
the heading "Executive Compensation" in the Company's definitive proxy
statement relating to the Company's Annual Meeting of Stockholders to be held
May 10, 2001, which will be filed with the Securities and Exchange Commission
on or about April 10, 2001, and such information is incorporated herein by
reference.


ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.



	Information relating to the ownership of certain beneficial owners and
management of the Company's Common Stock will be set forth under the heading
"Securities Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement relating to the Company's Annual Meeting
of Stockholders to be held May 10, 2001, which will be filed with the
Securities and Exchange Commission on or about April 10, 2001, and such
information is incorporated herein by reference.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

	Information relating to the business relationships and related
transactions with respect to the Company and certain Directors and nominees
for election as Directors is set forth under the heading "Certain
Transactions" in the Company's definitive proxy statement relating to the
Company's Annual Meeting of Stockholders to be held May 10, 2001, which will
be filed with the Securities and Exchange Commission on or about April 10,
2001, and such information is incorporated herein by reference.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.

	No.                         		Exhibit
      ---                                 -------
      3.1         Articles of Incorporation, as amended, of Arrow-Magnolia
                  International, Inc. (1).

      3.2         Bylaws of Arrow-Magnolia International, Inc. (4)

                                       6
<PAGE>

      10.19       Arrow-Magnolia International, Inc. Amended and Restated Non-
                  Qualified Stock Option Plan.

      10.20       Credit Loan Agreement dated August 5, 1994 between Arrow-
                  Magnolia International, Inc. and Chase Bank of Texas (2).

      10.21       Extension and Modification Agreement dated August 18, 1994
                  between Arrow-Magnolia International, Inc. and Chase Bank of
                  Texas (2).

      10.22       1998 Stock Bonus Plan (3).

      10.23       Executive Employment Agreement dated March 1, 1999 between
                  Arrow-Magnolia International, Inc. and Morris Shwiff (5).

      10.24       Executive Employment Agreement dated March 1, 1999 between
                  Arrow-Magnolia International, Inc. and Mark Kenner (5).

      10.25       Executive Employment Agreement dated March 1, 1999 between
                  Arrow-Magnolia International, Inc. and Fred Kenner (5).

	23.1        Consent of Independent Auditors.





(1)   Filed as Exhibit 3.1 to Arrow-Magnolia International, Inc. Form 10-K for
      the fiscal year ended December 31, 1988 and incorporated herein by
      reference.

(2)   Filed as Exhibits 10.20 and 10.21 to Arrow-Magnolia International, Inc.
      Form 10-KSB for the fiscal year ended December 31, 1994 and
      incorporated herein by reference.

(3)   Filed as Exhibit 10.19 to Arrow-Magnolia International, Inc. Form S-8
      Registration Statement No. 333-47709 filed on March 10, 1998 and
      Incorporated herein by reference.

(4)	Filed as Exhibit 3.2 to Arrow-Magnolia International, Inc. Form 10-KSB
      for the fiscal year ended December 31, 1999 and incorporated herein by
      reference.

(5)   Filed as Exhibits 10.23, 10.24 and 10.25 to Arrow-Magnolia International,
      Inc. Form 10-KSB/A for the fiscal year ended December 31, 1999 filed on
      May 1, 2000 and incorporated herein by reference.


(b)  Reports on Form 8-K.

	None.

                                        7
<PAGE>




	                    ARROW-MAGNOLIA  INTERNATIONAL, INC.

	                Index to Financial Statements and Schedule



											Page
                                                                  ----
Independent Auditors' Reports							F-2

Financial Statements:

	Balance Sheets as of December 31, 2000 and 1999			F-3

	Statements of Income for the years ended December
      31, 2000, 1999 and 1998		                              F-4

	Statements of Stockholders' Equity for the years
      ended December 31, 2000, 1999 and 1998				F-5

	Statements of Cash Flows for the years ended
       December 31, 2000, 1999 and 1998		                  F-6

      Notes to Financial Statements	      				F-7

                                         F-1
<PAGE>






	                     INDEPENDENT AUDITORS' REPORT





The Stockholders and Board of Directors
Arrow-Magnolia International, Inc.


We have audited the accompanying balance sheets of Arrow-Magnolia
International, Inc., a Texas corporation, as of December 31, 2000 and 1999,
and the related statements of income, stockholders' equity and cash flows for
the three years then ended.  These financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Arrow-Magnolia International,
Inc. as of December 31, 2000 and 1999, and the results of its operations and
its cash flows for the three years then ended, in conformity with accounting
principles generally accepted in the United States of America.



                                           PHILIP VOGEL & CO. PC




                                            Certified Public Accountants

Dallas, Texas
March 27, 2001
                                          F-2

<PAGE>

	                   ARROW-MAGNOLIA INTERNATIONAL, INC.
                                  BALANCE SHEETS
	                      DECEMBER 31, 2000 AND 1999

<TABLE>                               2000                1999
        Assets                        ----                ----
<S>                                   <C>                 <C>
Current assets:
  Cash and cash equivalents          $2,509,660         $2,710,341
  Short-term investments                300,000            300,000
  Trade accounts receivable,
    less allowance for doubtful
    accounts of $497,245 in 2000
    and $438,990 in 1999              2,708,628          2,373,686
  Inventories                           671,872            672,068
  Prepaid income taxes                   59,141             79,961
  Deferred income taxes                 216,600            184,900
  Other assets                           20,807              9,247
                                     ----------         ----------
    Total current assets             $6,558,708         $6,330,203

Property and equipment, net           2,532,001          1,650,918
Intangible assets, net                  119,106            125,176
Notes receivable                         53,176             40,000
Other assets, at cost                     1,850              2,700
                                     ----------         ----------
    Total assets                     $9,264,841         $8,148,997
                                     ==========         ==========
       Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                     $715,757           $584,549
  Accrued liabilities                   252,722            236,510
  Income taxes payable                   22,304             24,498
                                      ---------          ---------
    Total current liabilities          $990,783           $845,557

Deferred income taxes                    41,200             21,500
Deferred compensation                   104,500            104,500
                                      ---------          ---------
    Total liabilities                $1,136,483           $971,557
                                      ---------          ---------
Commitments and contingencies (see Note I)

Stockholders' equity:
  Preferred stock - par value $.10,
   authorized 500,000 shares; none issued    $0                 $0
  Common stock - par value $.10,
   Authorized 10,000,000 shares;
   3,262,066 shares
   issued in 2000 and 1999              326,207            326,207
  Additional paid-in capital          5,607,214          5,607,214
  Retained earnings                   2,256,405          1,305,487
  Less cost of 13,500 shares of
   Common stock in treasury             (61,468)           (61,468)
                                     ----------         ----------
   Total stockholders' equity        $8,128,358         $7,177,440
                                     ----------         ----------
   Total liabiliities and stockholders'
     equity                          $9,264,841         $8,148,997
                                     ==========         ==========
</TABLE>
The accompanying notes are an integral part of these statements.
                                        F-3
<PAGE>







	                    ARROW-MAGNOLIA INTERNATIONAL, INC.
	                        STATEMENTS OF INCOME
	             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
                                       2000           1999            1998
                                     -----------    -----------     ----------
  <S>                                    <C>            <C>             <C>
Net sales                            $14,193,264    $14,001,716    $13,769,007
Cost of sales                          7,965,588      8,004,814      7,718,708
                                     -----------    -----------     ----------
  Gross profit                        $6,227,676     $5,996,902     $6,050,299

General and administrative expenses    4,911,863      4,461,476      4,202,927
                                     -----------    -----------     ----------
Income before other income (expense)  $1,315,813     $1,535,426     $1,847,372
                                     -----------    -----------     ----------
Other income (expense):
  Interest expense                            $0             $0       $(69,278)
  Interest income                        152,294        110,244         87,616
  Other income                             1,302            522         13,620
                                     -----------    -----------     ----------
  Total other income (expense)          $153,596       $110,766        $31,958
                                     -----------    -----------     ----------
Income before income taxes            $1,469,409     $1,646,192     $1,879,330

Provision for income taxes               518,491        598,130        672,050
                                     -----------    -----------     ----------
Net income                              $950,918     $1,048,062     $1,207,280
                                     ===========    ===========    ===========



Earnings per common share:

  Basic                                    $0.29          $0.32          $0.37
                                     ===========    ===========    ===========

  Diluted                                  $0.26          $0.29          $0.33
                                     ===========    ===========    ===========
</TABLE>


The accompanying notes are an integral part of these statements.

                                        F-4
<PAGE>

                         ARROW-MAGNOLIA INTERNATIONAL, INC.
                         STATEMENTS OF STOCKHOLDERS' EQUITY
	          FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>

                    Common stock    Additional           Cost of     Total
                   Shares            paid-in   Retained  treasurystockholders'
               Outstanding  Amount   capital   earnings   stock      equity
               -----------  ------   -------   --------   -------  -----------
   <S>          <C>        <C>        <C>        <C>       <C>       <C>

Balances at
December 31,
1997           2,681,392  $268,139  $2,776,182  $1,868,639      $0  $4,912,960

10% stock
dividend         268,909    26,891   1,721,018  (1,747,909)      0           0

Exercise of
stock options
and related
tax benefits      4,356       436      10,351            0       0      10,787

Expense resulting
from issuance of
stock warrants        0         0       7,720            0       0       7,720

Shares issued
pursuant to stock
bonus plan        4,333       433      31,524            0       0      31,957

Purchase of
13,500 shares
of common
stock for
treasury        (13,500)       0            0            0  (61,468)  (61,468)

Net income            0        0            0    1,207,280        0  1,207,280
               -------- --------  -----------   ----------   ------   --------

Balances at
December 31,
1998          2,945,490 $295,899   $4,546,795   $1,328,010 $(61,468)$6,109,236

10% stock
dividend       295,185   29,519    1,040,527    (1,070,585)       0      (539)

Exercise of
stock options
and related
tax benefits     4,791      479        7,414             0        0      7,893

Shares issued
pursuant to
stock bonus
plan             3,100      310       12,478             0        0     12,788

Net income           0        0            0     1,048,062        0  1,048,062
             --------- --------  -----------   -----------  -------   --------
Balances at
December 31,
1999         3,248,566 $326,207   $5,607,214    $1,305,487 $(61,468)$7,177,440

Net income           0        0            0       950,918        0    950,918
             --------- --------  -----------   -----------  -------   --------
Balances at
December 31,
2000         3,248,566 $326,207   $5,607,214    $2,256,405 $(61,468)$8,128,358
             ========= ========  ===========   ===========  ======= ==========

</TABLE>

The accompanying notes are an integral part of these statements.

                                         F-5

<PAGE>

                         ARROW-MAGNOLIA INTERNATIONAL, INC.
                             STATEMENTS OF CASH FLOWS
	          FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
                                   2000            1999            1998
                                ----------      ----------      ----------
<S>                                <C>             <C>              <C>
Cash flows from operating activities:
  Net income                      $950,918      $1,048,062      $1,207,280

  Adjustments to reconcile
  net income to net cash
  provided by operating
  activities:
    Depreciation and
      amortization                 277,236         192,721         152,173
    Deferred income taxes          (12,000)          8,100         (23,642)
    Provision for doubtful
      accounts                     351,050         381,764         548,547
    Loss on retirement of
      assets                         4,317          19,327               0

  Changes in operating assets
  and liabilities:
    Receivables                   (757,992)       (408,130)       (122,515)
    Inventories                        196          30,547        (101,458)
    Prepaid income taxes            20,820          (9,100)        (70,861)
    Notes receivable               (13,176)              0               0
    Other assets                   (10,710)         18,068            (683)
    Accounts payable               131,208          93,102         (79,979)
    Accrued liabilities             16,212          20,571            (385)
    Income taxes payable            (2,194)        (38,797)        (76,986)
                                ----------      ----------       ---------
      Net cash provided by
      operating activities        $955,885      $1,356,235      $1,431,491
                                ----------      ----------       ---------

Cash flows from investing activities:
    Proceeds from sale of
      short-term investments     $300,000         $300,000        $300,000
    Purchase of short-term
      investments                (300,000)        (300,000)       (300,000)
    Acquisition of property
      and equipment            (1,156,566)      (1,052,755)       (211,326)
                                ---------        ---------       ---------
      Net cash used by
      investing activities    $(1,156,566)     $(1,052,755)      $(211,326)
                                ---------        ---------       ---------

Cash flows from financing activities:
   Repayments of note payable           0                0        (600,000)
   Repayments of long-term debt         0                0        (101,361)
   Proceeds from issuance of
     common stock                       0           20,681          50,464
   Cash issued in lieu of
     fractional shares                  0             (539)              0
   Purchase of common stock
     for treasury                       0                0         (61,468)
                                ---------        ---------        --------

Net cash provided (used) by
financing activities                    0          $20,142       $(712,365)
                                ---------        ---------        --------

Net increase (decrease) in
cash and cash equivalents       $(200,681)        $323,622        $507,800

Cash and cash equivalents:
Beginning of year               2,710,341        2,386,719       1,878,919
                               ----------       ----------      ----------
End of year                    $2,509,660       $2,710,341      $2,386,719
                               ==========       ==========      ==========

</TABLE>

The accompanying notes are an integral part of these statements.

                                        F-6

<PAGE>

Note A - Summary of significant accounting policies:

Nature of the operations
------------------------
The Company is engaged in the sale and distribution of chemical products,
primarily industrial and institutional cleaning and maintenance supplies and
related products, to industrial users, telephone supply distributors,
governmental agencies and school systems.  The Company's customers operate in
many different industries and geographic regions. No single customer accounted
for more than 10% of net sales in 2000, 1999 or 1998.

Use of estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect 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.
Actual results could differ from those estimates.

Concentrations of credit risk
-----------------------------
In the ordinary course of business, the Company extends unsecured credit to
its customers with payment terms generally  30 - 90 days.  In addition, the
terms of sale generally provide for the limited ability to return the product
under certain conditions.  Returns of merchandise have historically not been
significant to the Company.  Because of the credit risk involved, management
has provided an allowance for doubtful collections which reflects its opinion
of the amounts which will eventually become uncollectible.  In the event of
complete nonperformance by the Company's customers, the maximum exposure to
the Company is the outstanding accounts receivable balance at the date of
nonperformance.

At December 31, 2000, the Company had cash balances of approximately $400,000
in banking institutions in excess of federally insured amounts.  These
balances are therefore considered outstanding items.  The Company also had
approximately $900,000 of its funds invested in uninsured money market
accounts at December 31, 2000.  These funds are managed by outside investment
management firms and are invested in short-term instruments with maturities of
120 days or less.

Cash equivalents and statements of cash flows
---------------------------------------------
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.  Cash equivalents of $986,500 and $988,119 at December 31,
2000 and 1999, respectively, consist of U.S. treasury bills with original
maturities of less than three months.

Cash paid for interest during 2000, 1999 and 1998 was $-0-, $9,111 and
$60,167, respectively.  Cash paid for income taxes during 2000, 1999 and 1998
was $511,865, $637,927 and $843,539, respectively.

Short-term investments
----------------------
Short-term investments at December 31, 2000 and 1999 represent investments in
bank certificates of deposit.

                                     F-7
<PAGE>


Note A - Summary of significant accounting policies (continued):

Inventories
-----------
Inventories, which consist primarily of merchandise purchased for resale and
raw materials purchased for blending, are stated at the lower of cost or
market. Cost is determined using the first-in, first-out method.

Property and equipment
----------------------
Property and equipment are stated at cost.  Depreciation is computed using the
straight-line method over the estimated useful lives of the assets.  The cost
of maintenance and repairs is charged to expense as incurred; significant
renewals and betterment are capitalized.

Goodwill
--------
Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the expected
periods to be benefitted, generally 15 to 40 years.  The Company assesses the
recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation.
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds.  The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are not
achieved.

Income taxes
------------
Income taxes are accounted for under the asset and liability method.  Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis.  Deferred
tax assets and liabilities are measured using enacted tax rates that will
apply in the years in which those temporary differences are expected to be
recovered or settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Earnings per share
------------------
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share, during 1997 and retroactively
restated all per share amounts.  SFAS No. 128 reporting requirements replace
primary and fully-diluted earnings per share (EPS) with basic and diluted EPS.
Basic EPS is calculated by dividing net income (available to common
stockholders) by the weighted average number of common shares outstanding for
the period.  Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock.

                                     F-8
<PAGE>


Note A - Summary of significant accounting policies (continued):

Earnings per share (continued)
-----------------------------
Shares used in calculating basic and diluted income per share are as follows:

<TABLE>
                                    2000            1999            1998
                                  ---------       ---------       ---------
<S>                                  <C>             <C>            <C>
Weighted average common shares
   outstanding                    3,248,566       3,246,602       3,249,928

Dilutive securities:
   Common stock options             769,092         770,690         774,765
   Assumed repurchase of common
      shares                       (373,048)       (355,010)       (338,971)
                                  ---------       ---------       ---------
Weighted average common shares
   outstanding - diluted basis    3,644,610       3,662,282       3,685,722
                                  =========       =========       =========
</TABLE>

Stock option plan
----------------
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise price.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, which
permits entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant.  Alternatively, SFAS No.
123 allows entities to continue to apply the provisions of APB Opinion No. 25
and provide proforma net income and proforma earnings per share disclosures
for employee stock option grants made in 1996 and future years as if the fair-
valued-based method defined in SFAS No. 123 had been applied.  The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the proforma disclosure provisions of SFAS No. 123.

Impairment of long-lived assets and long-lived assets to be disposed of
-----------------------------------------------------------------------
The Company has adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.  Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset.  If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets.  Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.  During the years ended December 31, 2000, 1999 and
1998, the Company's analyses indicated that there was not an impairment of its
long-lived assets.


                                         F-9
<PAGE>

Note A - Summary of significant accounting policies (continued):

Transfers and servicing of financial assets and extinguishment of liabilities
-----------------------------------------------------------------------------
The Company has adopted the provisions of SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.
This statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities based on
consistent application of a financial-components approach that focuses on
control.  It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.

Reporting comprehensive income and operating segments
-----------------------------------------------------
The Company has adopted the provisions of SFAS No. 130, Reporting
Comprehensive Income and SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information.  SFAS No. 130 requires that an enterprise
report, by major components and as a single total, the change in its net
assets during the period from nonowner sources.  SFAS No. 131 establishes
annual and interim reporting standards for an enterprise's operating segments
and related disclosures about its products, services, geographic areas and
major customers.  Adoption of these statements has had no impact on the
Company's  financial position, results of operations, cash flows, or related
disclosures.

Fair value of financial instruments
-----------------------------------
The Company defines the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between
willing parties.  Financial instruments included in the Company's financial
statements include cash and cash equivalents, short-term investments, trade
accounts receivable, other receivables, note receivable, other assets, trade
accounts payable, notes payable and long-term debt.  Unless otherwise
disclosed in the notes to the financial statements, the carrying value of
financial instruments is considered to approximate fair value due to the short
maturity and characteristics of those instruments.  The carrying value of
long-term debt approximates fair value as terms approximate those currently
available for similar debt instruments.

Revenue recognition
-------------------
The Company generally recognizes revenues when its products are shipped to
customers.  Appropriate provisions for estimated returns of product and other
allowances have been made in the accompanying financial statements.


Note B - Property and equipment:

Property and equipment consist of the following at December 31, 2000 and 1999:

<TABLE>                                            2000              1999
                                               ----------         ----------
      <S>                     <C>                  <C>                <C>
Land                                              $97,209            $97,209
Buildings and improvements   5 to 40 years      1,363,588          1,128,805
Machinery and equipment      3 to 10 years      1,888,457          1,177,733
Furniture and fixtures       5 to 10 years        486,078            295,516
                                               ----------         ----------
                                               $3,835,332         $2,699,263
Less accumulated depreciation                   1,303,331          1,048,345
                                               ----------         ----------
                                               $2,532,001         $1,650,918
                                               ==========         ==========
</TABLE>

Depreciation expense charged to operations was $271,166, $186,651 and $150,728
in 2000, 1999 and 1998, respectively.

                                     F-10

<PAGE>

Note C - Intangible assets:

Intangible assets consist of the following at December 31, 2000 and 1999:

<TABLE>
                                                   2000              1999
                                               ----------         ----------
  <S>                       <C>                    <C>                <C>
Goodwill                 15 to 40 years          $160,124           $160,124

Less accumulated amortization                      41,018             34,948
                                               ----------         ----------
                                                 $119,106           $125,176
                                               ==========         ==========
</TABLE>

Note D - Credit Agreement:

The Company has available at December 31, 2000, a revolving line of credit
with an asset-based lender due on May 1, 2001.   The credit agreement provides
for a commitment from the lender at the lesser of $1,250,000 or the borrowing
base as defined.  At December 31, 2000 and 1999, there were no outstanding
balances due under this agreement.  The credit agreement contains various debt
covenants, the most restrictive of which requires the Company to maintain
certain minimum financial criteria.  At December 31, 2000, the Company
believes it is in compliance with all debt covenant requirements.  The note
requires monthly payments of interest at the lender's prime rate (9.5% at
December 31, 2000) and is collateralized by certain accounts receivable and
inventories.

Note E - Income taxes:

Income tax expense for the years ended December 31, 2000, 1999 and 1998
consists of the following:

<TABLE>
                                     2000            1999            1998
                                  ----------      ----------      ----------
   <S>                               <C>             <C>              <C>
U.S. federal - current              $500,800        $536,398        $641,509
U.S. federal - deferred              (12,000)          8,100         (23,642)
State - current                       29,691          53,632          54,183
                                  ----------      ----------      ----------
                                    $518,491        $598,130        $672,050
                                  ==========      ==========      ==========
</TABLE>

Income tax expense for the years ended December 31, 2000, 1999 and 1998
differs from the "expected" tax expense (computed by applying the 34% U.S.
federal corporate rate to income before income taxes) as follows:

<TABLE>
                                     2000            1999             1998
                                  ---------       ----------       ----------
  <S>                                <C>              <C>             <C>
Computed "expected" tax expense    $499,599         $559,705         $638,972
Amortization of goodwill                703              939              703
State income taxes, net of federal
   Benefit                           19,596           35,397           35,761
Other                                (1,407)           2,089           (3,386)
                                  ---------        ---------        ---------
                                   $518,491         $598,130         $672,050
                                  =========        =========        =========
</TABLE>
                                      F-11

<PAGE>

Note E - Income taxes (continued):

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 2000 and 1999 are presented below:

<TABLE>
                                                     2000            1999
                                                  ----------      ----------
  <S>                                                 <C>             <C>
Deferred tax assets:
  Accounts receivable, principally due to
    allowance for doubtful accounts                 $169,000        $149,300
  Overhead allocation to inventories under IRC 263a   40,400          21,400
  Expense resulting from issuance of stock
    options and warrants                              35,450          35,450
                                                  ----------      ----------
Total gross deferred tax assets                     $244,850        $206,150
Less valuation allowance                                   0               0
                                                  ----------      ----------
Net deferred tax assets                             $244,850        $206,150
                                                  ----------      ----------
Deferred tax liabilities:
  Property and equipment, principally due to
    differences in depreciation                     $(68,900)       $(42,200)
  Other                                                 (550)           (550)
                                                  ----------       ---------
Total gross deferred tax liabilities                $(69,450)       $(42,750)
                                                  ----------       ---------
Net deferred tax asset                              $175,400        $163,400
                                                  ==========       =========
</TABLE>

Deferred tax assets and liabilities are computed by applying the effective
U.S. federal income tax rate to the gross amounts of temporary differences and
other tax attributes.  Deferred tax assets and liabilities relating to state
income taxes are not material.  In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized.  The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible.  Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment.  The Company expects the net deferred tax assets at
December 31, 2000, to be realized as a result of future taxable income.

                                   F-12
<PAGE>

Note F - Stockholders' equity:

Stock equivalents at December 31, 2000, 1999 and 1998, and changes in stock
equivalents for the three-year period ended December 31, 2000, are presented
below:

<TABLE>                         Stock options                 Stock warrants
                        ------------------------------------  --------------
  <S>                      <C>      <C>      <C>       <C>          <C>
Stock options/warrants
exercise price             $0.50    $2.00    $2.875   $4.375       $4.75
                        ========  =======  ========  =======     =======
Stock options issued
  and outstanding,
  December 31, 1997      589,328   55,000         0        0           0
   Exercise of options    (4,356)       0         0        0           0
   10% stock dividend     58,497    5,500         0        0           0
                        --------  -------  --------  -------     -------
Stock options issued
  and outstanding
  December 31, 1998      643,469   60,500         0        0           0
   Issuance of
     options/warrants          0        0         0   20,000      10,000
   Exercise of
     options/warrants     (4,791)       0         0        0           0
   10% stock dividend     63,864    6,050         0    2,000       1,000
                        --------  -------  --------  -------     -------
Stock options issued
   and outstanding,
   December 31, 1999     702,542   66,550         0   22,000      11,000
   Issuance of
     options/warrants          0        0    42,000        0           0
                        --------  -------  --------  -------     -------
Stock options issued
   and outstanding,
   December 31, 2000     702,542   66,550    42,000   22,000      11,000
                        ========  =======  ========  =======     =======
</TABLE>
Stock option plan

The Company has a non-qualified stock option plan (Plan) covering
approximately 870,000 shares of common stock.  Participants are selected by
the Company's board of directors from the executive officers and other key
employees of the Company.  The Plan provides that the option price per share
and vesting period for stock options issued under the Plan are determined by
the Company's board of directors.


$.50 stock options
-----------------
In December 1994, 400,000 stock options were granted to certain officers of
the Company at an option price of $.50 per share, the estimated fair market
value of the common stock at the date of grant.  These stock options were
fully exercisable at the date of grant.

In January 1995, an additional 100,000 options were granted to certain key
employees.  These stock options were issued at an option price of $.50 per
share, the estimated fair value of the common stock at the date of grant, and
vest in annual increments of 20% with the first 20% vesting occurring on the
date of issuance.
                         F-13
<PAGE>

Note F - Stockholders' equity (continued):

Options outstanding were increased by 50,000 in 1995, 54,208 in 1997, 58,497
in 1998, and 63,864 in 1999 due to 10% stock dividends.   At December 31,
2000, 24,027 of these options had been exercised; 702,542 options remain
outstanding and all are exercisable.

$2.00 stock options
-------------------
In January 1997, the Company granted 50,000 stock options to an employee of
the Company.  These stock options were issued at an option price of $2.00 per
share.  The stock options were fully exercisable at the date of grant.  During
1997, the Company recognized the aggregate excess of the market price over the
exercise price at date of grant, $104,500, as expense.  Options outstanding
were increased by 5,000 in 1997, 5,500 in 1998, and 6,050 in 1999 due to 10%
stock dividends.  At December 31, 2000, none of these options have been
exercised; 66,550 options remain outstanding and all are exercisable.

$2.875 stock options
-------------------
In January 2000, the Company granted 42,000 stock options to certain key
employees.  These options were issued at an option price of $2.875, and vest in
annual increments of 20% with the first 20% vesting occurring on the date of
issuance.  At December 31, 2000, 42,000 options remain outstanding and 8,400
are exercisable.

$4.375 stock options
--------------------
In January 1999, the Company granted 20,000 stock options to certain employees
of the Company.  These stock options were issued at an option price of $4.375
per share and vest in annual increments of 20% with the first 20% vesting
occurring on the date of issuance.  Total stock options outstanding were
increased by 2,000 in 1999, due to a 10% stock dividend.  At December 31,
2000, none of these options had been exercised; 22,000 options remain
outstanding and 11,000 are exercisable.

The weighted average exercise price of all outstanding options as of December
31, 2000, was $0.84.

Stock warrants
--------------

In May 1996, the Company issued stock warrants to a service provider.  The
stock warrants were exercisable to purchase up to 40,000 shares of the
Company's common stock at $2.25 per share.  Total warrants outstanding were
increased to 44,000 in 1997 due to a 10% stock dividend. The Company
recognized the aggregate excess of the estimated fair value over the exercise
price at date of grant of $50,000 as expense over the two year term of the
service agreement, which was the same life as the warrants.  The Company
recognized approximately  $7,700 and $25,000 as compensation expense during
1998 and 1997, respectively, related to these warrants. During 1997, all of
the warrants were exercised.

In February 1999, the Company issued stock warrants to a service provider.
The stock warrants are exercisable to purchase up to 10,000 shares of the
Company's common stock at $4.75 per share.  The stock warrants were increased
to 11,000 in 1999 due to a 10% stock dividend.    No compensation cost was
recognized with respect to these stock warrants.  At December 31, 2000, none
of these warrants have been exercised; 11,000 remain outstanding and all are
exercisable.

Stock dividends
---------------
Effective July 14, 1998, and July 20, 1999, the Company issued 10% stock
dividends on all outstanding common shares.

                                      F-14
<PAGE>
Note G - Proforma information related to stock options:

The per share weighted-average fair value of stock options granted during 2000
and 1999 was $1.99 and $1.94, respectively, on the date of grant, using the
Black Scholes option-pricing model.  There were no stock options granted
during 1998.  The following weighted-average assumptions were used in the
pricing model:

<TABLE>
                                               1999            1997
                                           -----------     ------------
  <S>                                         <C>            <C>
Expected dividend yield                          0.00%            0.00%
Risk-free interest rate                          6.66%            4.84%
Expected life                                  7 years          7 years

</TABLE>
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, has recognized no compensation expense for stock options granted
at exercise prices at least equal to the market value of the Company's common
stock.  Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the proforma amounts
indicated below:
<TABLE>
                                      2000            1999           1998
                                  -----------     -----------    -----------
  <S>                                <C>              <C>             <C>
Net income:
   As reported                       $950,918      $1,048,062     $1,207,280
                                   ==========      ==========     ==========
   Proforma                          $923,772      $1,037,796     $1,207,280
                                   ==========      ==========     ==========
Basic earnings per common share:
   As reported                          $0.29           $0.32          $0.37
                                   ==========      ==========     ==========
   Proforma                             $0.28           $0.32          $0.37
                                   ==========      ==========     ==========
Diluted earnings per common share:
   As reported                          $0.26           $0.29          $0.33
                                   ==========      ==========     ==========
   Proforma                             $0.25           $0.28          $0.33
                                   ==========      ==========     ==========
</TABLE>

Proforma net income reflects only options granted in 2000 and 1999.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the proforma net income amounts
presented above because compensation cost is reflected over the option's
vesting period, and compensation cost for options granted prior to January 1,
1995, is not considered.
                                   F-15
<PAGE<

Note H - Quarterly financial data (unaudited):

Quarterly net income and earnings per share for 2000 are as follows:

<TABLE>
                                                       Earnings per share
                                                    -------------------------
                                Net income            Basic          Diluted
                               -----------           ---------      ----------
  <S>                              <C>                <C>               <C>
First quarter                     $333,122            $0.10             $0.09
Second quarter                     303,170            $0.09             $0.08
Third quarter                      352,196            $0.11             $0.10
Fourth quarter                     (37,570)          $(0.01)           $(0.01)
                               -----------
                                  $950,918
                               ===========
</TABLE>

Note I - Commitments and contingencies:

Litigation

The Company is involved in various claims and legal actions arising in the
ordinary course of business.  In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.

Environmental remediation

As a result of an environmental site investigation conducted by an outside
engineering firm during 2000, the Company discovered that certain regulated
chemicals exist in the soils and ground water underneath its facilities.  It
appears that this contamination was the result of activities that took place
prior to 1985, when current management assumed control of the Company.  Based
on this investigation, the Company believes it is likely that it will incur
costs for investigation and monitoring and, possibly, environmental
remediation costs. At this time, it is not possible to estimate the amount of
such liability because the discovery is still in an investigatory stage and
the extent of possible contamination has not been determined.

On March 2, 2001, the Company notified the Texas Natural Resource Conservation
Commission (TNRCC) of the results of this investigation and that it intends to
apply for the Voluntary Cleanup Program during 2001.  Subject to approval from
the TNRCC, the Company plans to conduct further investigations into the
contamination, after which time, the Company believes it should be able to
reasonably estimate the potential costs of the environmental remediation.

The Company has not been subjected to any claims or assessments with respect
to this environmental issue.

                                     F-16
<PAGE>



                                 SIGNATURES


	In accordance with Section 13 or 15(d) of The Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunder duly authorized.

						ARROW-MAGNOLIA INTERNATIONAL, INC.


						By:   /s/ Mark I. Kenner
                                       ----------------------------------
		                            Mark I. Kenner, Vice Chairman and
						    Chief Executive Officer


Dated:  March 28, 2001

	In accordance with The Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

Signature                			Title
	Date

/s/ Morris Shwiff
-------------------        Director and Chairman of the        }
Morris Shwiff              Board 		             	   }
										   }
									         }
/s/ Mark I. Kenner
-------------------        Director, Vice Chairman and	   }
Mark I. Kenner      	   Chief Executive Officer		   }	  March
			         (Principal Executive Officer)	   }   28, 2001
								               }
/s/ Fred Kenner
-------------------         Director, President and            }
Fred Kenner         	    Chief Operating Officer		   }
				    (Principal Financial and      	   }
				    Accounting Officer)          	   }
								               }
/s/ Robert D. Derosier
-------------------          Director			         }
Robert D. DeRosier						         }
								               }

-------------------          Director			         }
Clifton R. Duke							         }

<PAGE>

                                    INDEX TO EXHIBITS


Number     Exhibit                            				Page

3.1   Articles of Incorporation, as amended, of
      Arrow-Magnolia International, Inc. (1).

3.2  	Bylaws of Arrow-Magnolia International, Inc.

10.19 Arrow-Magnolia International, Inc.  Amended and
      Restated Non-Qualified Stock
	Option Plan (2).

10.20 Credit Loan Agreement dated August 5, 1994 between
      Arrow-Magnolia International, Inc. and Chase Bank
      of Texas (2).

10.21 Extension and Modification Agreement dated August 18,
      1994 between Arrow-Magnolia International, Inc. and
      Chase Bank of Texas (2).

10.22	1998 Stock Bonus Plan (3).

10.23 Executive Employment Agreement dated March 1, 1999 between
      Arrow-Magnolia International, Inc. and Morris Shwiff (5).

10.24 Executive Employment Agreement dated March 1, 1999 between
      Arrow-Magnolia International, Inc. and Mark Kenner (5).

10.25 Executive Employment Agreement dated March 1, 1999 between
      Arrow-Magnolia International, Inc. and Fred Kenner (5).

23.1  Consent of Independent Auditors.





(1)  Filed as Exhibit 3.1 to Arrow-Magnolia International, Inc. Form 10-K for
     the fiscal year ended December 31, 1988 and incorporated herein by
     reference.

(2)  Filed as Exhibits 10.20 and 10.21 to Arrow-Magnolia International, Inc.
     Form 10-KSB for the fiscal year ended December 31, 1994 and
     Incorporated herein by reference.

(3)  Filed as Exhibit 10.19 to Arrow-Magnolia International, Inc. Form S-8
     Registration Statement No. 333-47709 filed on March 10, 1998 and
     incorporated herein by reference.

(4)  Filed as Exhibit 3.2 to Arrow-Magnolia International, Inc. Form 10-KSB for
     the fiscal year ended December 31, 1999 and incorporated herein by
     reference.

(5)  Filed as Exhibits 10.23, 10.24 and 10.25 to Arrow-Magnolia International,
     Inc. Form 10-KSB/A for the fiscal year ended December 31, 1999 filed on
     May 1, 2000 and incorporated herein by reference.