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, 2001
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, 2001 were:
$13,574,847

	The aggregate market value of the registrant's voting stock held by non-
affiliates as of December 31, 2001 was:  $3,288,566 (* see note on index
page).

	The number of shares outstanding of each class of registrant's common
stock as of December 31, 2001 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 9, 2002 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 31, 2001.  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, 2001

	                             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 2001, 2000 or 1999.

	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 2001 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.  The Company entered the Voluntary
Cleanup Program offered by Texas Natural Resources Conservation Commission
("TNRCC")during 2001 and is causing 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 accrued an
expense reserve of $250,000 during fiscal 2000 in anticipation of potential
costs related to the environmental contamination.  Such amount will be
reviewed as more information becomes available to the Company and may be
adjusted as conditions warrant.

<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, 2001, 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.

	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.

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, 2001, to a vote of the Company's security holders, through
solicitation of proxies or otherwise.

                                         2
<PAGE>

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:


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

Fiscal 2001                     High             Low
-----------                     ----             ----
  Fourth Quarter	              $2.25            $1.90
  Third Quarter                  2.49             2.00
  Second Quarter                 2.32             1.90
  First Quarter                  2.82             1.62

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



</TABLE>


	The approximate number of record holders of the Company's Common Stock
as of December 31, 2001, 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       2001      2000
                             ------------------------       vs.       vs.
                             2001     2000     1999        2000      1999
                             ----     ----     ----        ----      ----

<S>                          <C>        <C>      <C>       <C>        <C>
Net sales                    100.0%   100.0%   100.0%     (4.4)%      1.4%
Cost of sales                 56.0%    56.1%    57.2%     (4.5)%     (0.5)%
Gross profit                  44.0%    43.9%    42.8%     (4.1)%      3.8%
General and administrative
  expenses                    39.3%    36.4%    31.9%      3.4%      15.7%
Income before other income
  (expense)                    3.8%     7.5%    11.0%    (52.2)%    (30.1)%
Income before income taxes     4.4%     8.6%    11.8%    (51.0)%    (25.9)%
Net income                     2.7%     5.5%     7.5%    (54.2)%    (25.0)%

</TABLE>

Comparison of Annual Results.

	Net sales for fiscal year 2001 decreased 4.4% to $13,574,847 from
$14,193,264 versus fiscal year 2000 after increasing 1.4% from fiscal 1999
to fiscal 2000.  The decrease in sales from 2000 to 2001 is the result of
general business conditions as affected by the economic downturn and the
events of September 11, 2001.  The prior year's modest increase is primarily
attributable to the extension of sales coverage through the addition of sales
personnel. Cost of sales as a percentage of net sales remained stable at 56.0%
in fiscal 2001 as compared to 56.1% in fiscal 2000 and 57.2% in fiscal 1999.
As a result of lower revenue, gross profit decreased by 4.1% to $5,969,865
from $6,227,676 for fiscal 2001 versus fiscal 2000, after increasing by 3.8%
from fiscal 1999 to fiscal 2000.

	General and administrative expenses increased by $173,403 and rose to
39.3% of net sales in fiscal 2001, or 3.4% from year to year, primarily as
the result of increased hospitalization costs (approximately $300,000 increase
from fiscal 2000 to fiscal 2001) and salary increases from year to year
(approximately $150,000 increase from year to year).  Such expenses also
increased to 36.4% of net sales in fiscal 2000 from 31.9% in fiscal 1999,
or 15.7% from year to year, due to expenses associated with hiring additional
sales personnel, such as increased travel expense, substantial one-time
expenses in the fourth quarter related to a proposed acquisition of the
Company that was terminated (approximately $50,000) and the accrual of
$250,000 in expense in anticipation of potential costs related to
environmental contamination.

	During the second quarter of 2001, the Company settled litigation that
was pending at the end of 2000 with the Company contributing $125,000 to the
resolution.

	Other income generated $87,673 in income in fiscal 2001, $153,596 in
income in fiscal 2000 and $110,766 in income during fiscal 1999, primarily
as the result of interest earned on excess cash in excess of interest paid.
The amount earned during 2001 was adversely affected by falling interest rates.

	As a result of these factors, for the fiscal year ended December 31, 2001,
net income fell to $360,072 versus $785,918 for fiscal 2000 and $1,048,062 for
fiscal 1999.

Liquidity and Capital Resources.

	The Company's working capital (total current assets less total current
liabilities), which was $5,567,925 as of December 31, 2000, improved to
$5,846,893 as of December 31, 2001.  The Company's current assets increased
as the Company's inventories grew and prepaid income taxes grew as a result
of overpayments.  Current liabilities decreased due to a reduction in accounts
payable.

	As shown in the Company's statements of cash flows for 2001, the Company
generated $277,787 in cash flow from operations as the Company continued to
capitalize on its profitability, partially offset by cash absorbed in
receivables as the result of recognition of bad debts.  The Company utilized
$463,948 in investing activities as it purchased property and equipment,
primarily related to sprayers and tanks placed into service with customers
to be used with the Company's 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. The Company entered the Voluntary
Cleanup Program offered by the Texas Natural Resources Conservation Commission
("TNRCC") during 2001 and is causing 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 accrued an
expense reserve of $250,000 during fiscal 2000 in anticipation of potential
costs related to the environmental contamination.  Such amount will be
reviewed from time to time as more information becomes available to the
Company and may be adjusted as conditions warrant.

	At December 31, 2001, the Company had $1,250,000 available under a
revolving line of credit bearing interest at the lender's prime rate and
collateralized by certain accounts receivable and inventories.  At December
31, 2001, 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, 2001.   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-18 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 9, 2002, which will be filed with the Securities and Exchange
Commission on or about April 16, 2002, 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 9, 2002, which will be filed with the Securities and Exchange Commission
on or about April 16, 2002, 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 9, 2002, which will be filed with the
Securities and Exchange Commission on or about April 16, 2002, 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 9, 2002, which will
be filed with the Securities and Exchange Commission on or about April 16,
2002, 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 (6).

      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.

(6)   Filed as Exhibit 10.19 to Arrow-Magnolia International, Inc. Form 10-KSB
      for the fiscal year ended December 31, 2000 filed on April 2, 2001 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, 2001 and 2000			F-3

	Statements of Income for the years ended December
      31, 2001, 2000 and 1999		                              F-4

	Statements of Stockholders' Equity for the years
      ended December 31, 2001, 2000 and 1999				F-5

	Statements of Cash Flows for the years ended
       December 31, 2001, 2000 and 1999		                  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, 2001 and 2000,
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, 2001 and 2000, 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 21, 2002
                                          F-2

<PAGE>

	                   ARROW-MAGNOLIA INTERNATIONAL, INC.
                                  BALANCE SHEETS
	                      DECEMBER 31, 2001 AND 2000

<TABLE>                               2001                2000
        Assets                        ----                ----
<S>                                   <C>                 <C>
Current assets:
  Cash and cash equivalents          $2,323,499         $2,509,660
  Short-term investments                200,000            300,000
  Trade accounts receivable,
    less allowance for doubtful
    accounts of $482,484 in 2001
    and $497,245 in 2000              2,756,494          2,780,628
  Inventories                           847,057            671,872
  Prepaid income taxes                  223,652             59,141
  Deferred income taxes                 237,500            216,600
  Other assets                          129,961             20,807
                                     ----------         ----------
    Total current assets             $6,718,163         $6,558,708

Property and equipment, net           2,702,165          2,532,001
Intangible assets, net                  113,035            119,106
Notes receivable                         24,262             53,176
Deferred income taxes                     1,100             43,800
Other assets, at cost                     1,850              1,850
                                     ----------         ----------
    Total assets                     $9,560,575         $9,308,641
                                     ==========         ==========
       Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                     $537,063           $715,757
  Accrued liabilities                   317,490            252,722
  Income taxes payable                   16,717             22,304
                                      ---------          ---------
    Total current liabilities          $871,270           $990,783

Environmental remediation liabliity     250,000            250,000
Deferred compensation                   104,500            104,500
                                      ---------          ---------
    Total liabilities                $1,225,770         $1,345,283
                                      ---------          ---------
Commitments and contingencies
  (see Note J)

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 2001 and 2000              326,207            326,207
  Additional paid-in capital          5,618,589          5,607,214
  Retained earnings                   2,451,477          2,091,405
  Less cost of 13,500 shares of
   Common stock in treasury             (61,468)           (61,468)
                                     ----------         ----------
   Total stockholders' equity        $8,334,805         $7,963,358
                                     ----------         ----------
   Total liabiliities and stockholders'
     equity                          $9,560,575         $9,308,641
                                     ==========         ==========
</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, 2001, 2000 AND 1999

<TABLE>
                                       2001           2000            1999
                                     -----------    -----------     ----------
  <S>                                    <C>            <C>             <C>
Net sales                            $13,574,847    $14,193,264    $14,001,716
Cost of sales                          7,604,982      7,965,588      8,004,814
                                     -----------    -----------     ----------
  Gross profit                        $5,969,865     $6,227,676     $5,996,902

General and administrative expenses    5,335,266      5,161,863      4,461,476
Settlement of lawsuit                    125,000              0              0
                                     -----------    -----------     ----------

Income before other income (expense)    $509,599     $1,065,813     $1,535,426
                                     -----------    -----------     ----------
Other income (expense):
  Interest expense                         $(183)            $0             $0
  Interest income                         87,856        152,294        110,244
  Other income                                 0          1,302            522
                                     -----------    -----------     ----------
  Total other income (expense)           $87,673       $153,596       $110,766
                                     -----------    -----------     ----------

Income before income taxes              $597,272     $1,219,409     $1,646,192

Provision for income taxes               237,200        433,491        598,130
                                     -----------    -----------     ----------
Net income                              $360,072       $785,918     $1,048,062
                                     ===========    ===========    ===========



Earnings per common share:

  Basic                                    $0.11          $0.24          $0.32
                                     ===========    ===========    ===========

  Diluted                                  $0.10          $0.22          $0.29
                                     ===========    ===========    ===========
</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, 2001, 2000 AND 1999
<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,
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       785,918        0    785,918
             --------- --------  -----------   -----------  -------   --------
Balances at
December 31,
2000         3,248,566 $326,207   $5,607,214    $2,091,405 $(61,468)$7,963,358

Issuance of
stock warrants
for professional
services             0        0       11,375             0        0     11,375

Net income           0        0            0       360,072        0    360,072
              -------- --------  -----------    ----------   ------   --------
Balances at
December 31,
2001         3,248,566 $326,207   $5,618,589    $2,451,477 $(61,468)$8,334,805
             ========= ========  ===========    ========== ======== ==========

</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, 2001, 2000 AND 1999

<TABLE>
                                   2001            2000            1999
                                ----------      ----------      ----------
<S>                                <C>             <C>              <C>
Cash flows from operating activities:
  Net income                      $360,072        $785,918      $1,048,062

  Adjustments to reconcile
  net income to net cash
  provided by operating
  activities:
    Depreciation and
      amortization                 399,855         277,236         192,721
    Deferred income taxes           21,800         (97,000)          8,100
    Provision for doubtful
      accounts                     348,136         351,050         381,764
    Loss on retirement of
      assets                             0           4,317          19,327
    Stock warrants issued
      for professional
      services                      11,375               0               0

  Changes in operating assets
  and liabilities:
    Receivables                   (324,002)       (757,992)       (408,130)
    Inventories                   (175,185)            196          30,547
    Prepaid income taxes          (164,511)         20,820          (9,100)
    Notes receivable                28,914         (13,176)              0
    Other assets                    (6,242)        (10,710)         18,068
    Accounts payable              (178,694)        131,208          93,102
    Accrued liabilities            (38,144)        266,212          20,571
    Income taxes payable            (5,587)         (2,194)        (38,797)
                                ----------      ----------       ---------
      Net cash provided by
      operating activities        $277,787        $955,885      $1,356,235
                                ----------      ----------       ---------

Cash flows from investing activities:
    Proceeds from sale of
      short-term investments     $100,000         $300,000        $300,000
    Purchase of short-term
      investments                       0         (300,000)       (300,000)
    Acquisition of property
      and equipment              (563,948)      (1,156,566)     (1,052,755)
                                ---------        ---------       ---------
      Net cash used by
      investing activities      $(463,948)     $(1,156,566)    $(1,052,755)
                                ---------        ---------       ---------

Cash flows from financing activities:
   Proceeds from issuance of
     common stock                       0                0          20,681
   Cash issued in lieu of
     fractional shares                  0                0            (539)
                                ---------        ---------        --------

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

Net increase (decrease) in
cash and cash equivalents       $(186,161)       $(200,681)       $323,622

Cash and cash equivalents:
Beginning of year               2,509,660        2,710,341       2,386,719
                               ----------       ----------      ----------
End of year                    $2,323,499       $2,509,660       $2,710,341
                               ==========       ==========      ==========

</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 2001, 2000 or 1999.

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.

On December 26, 2001, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 01-06, Accounting by Certain Entities
(Including Entities With Trade Receivables) That Lend to or Finance the
Activities of Others.  This SOP provides certain presentation and disclosure
changes for entities with trade receivables and is effective for periods
beginning January 1, 2002 and thereafter.  The Company has not fully analyzed
the provisions of the SOP, but does not believe adoption will have a material
effect on the financial statements.

At December 31, 2001, the Company had cash balances of approximately $300,000
in banking institutions in excess of federally insured amounts.  These
balances are before considering outstanding items.  The Company also had
approximately $1,422,546 of its funds invested in uninsured money market
accounts at December 31, 2001.  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 $-0- and $986,500 at December 31, 2001
and 2000, respectively, consist of U.S. treasury bills with original maturities
of less than three months.

Cash paid for interest during 2001, 2000 and 1999 was $-0-, $-0- and $9,111,
respectively.  Cash paid for income taxes during 2001, 2000 and 1999 was
$353,611, $511,865 and $637,927, respectively.

Short-term investments and financial instruments
------------------------------------------------

In accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities, short-term investments to be held to maturity at December
31, 2001 and 2000, consisting of bank certificates of deposit due within one
year, are carried at cost, which approximates market value.

                                     F-7
<PAGE>


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

The Company has also adopted the provisions of Statement of Financial
Accounting Standards (SFAS) Nos. 133 and 138, Accounting for Derivative
Instruments and Hedging Activities, and the related implementation guidance.
Currently the Company does not engage in hedging activities and has no
derivative instruments as defined in the statements.  Therefore, adoption
of these statements has had no affect on the financial statements of the
Company.

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.  The costs of
blending products are added tothe raw material cost of merchandise available for
sale using an internally developed overhead factor.

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, has been amortized on a straight-line basis over the expected
periods to be benefitted, generally 15 to 40 years.  The Company assessed the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life could be recovered through
undiscounted future operating cash flows of the acquired operation.  The amount
of goodwill impairment, if any, was 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 would
be impacted if estimated future operating cash flows were not achieved.

The Company plans to adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets effective for
periods beginning January 1, 2002, and thereafter.  SFAS 142 addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, Intangible Assets.  Specifically,
the statement addresses how intangible assets that are acquired should be
accounted for in financial statements upon their acquisition, as well as how
goodwill and other intangible assets should be accounted for after they have
been initially recognized in the financial statements. The statement changes
the accounting for goodwill from an amortization approach to an impairment
approach.  Goodwill will no longer be amortized over its estimated useful life,
but will be tested for impairment upon the occurrence of certain
circumstances.  An impairment loss will be recognized if the carrying amount
of a reporting unit exceeds its fair value.  Management has not fully analyzed
the effects of adoption of SFAS No. 142, however, it believes the effects on
the financial statements will not be material.  As of December 31, 2001, the
Company reported goodwill from acquired businesses of $113,035; management
does not believe this amount to be impaired. Prior amortization of goodwill
for each of the years ended December 31, 2001, 2000 and 1999, was
approximately $6,000.

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.
                                     F-8
<PAGE>

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

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.

Shares used in calculating basic and diluted income per share are as follows:

<TABLE>
                                    2001            2000            1999
                                  ---------       ---------       ---------
<S>                                  <C>             <C>            <C>
Weighted average common shares
   outstanding                    3,246,566       3,248,566       3,246,602

Dilutive securities:
   Common stock options             824,092         769,092         770,690
   Assumed repurchase of common
      shares                       (460,538)       (373,048)       (355,010)
                                  ---------       ---------       ---------
Weighted average common shares
   outstanding - diluted basis    3,612,120       3,644,610       3,662,282
                                  =========       =========       =========
</TABLE>

Stock based compensation
----------------
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.

In addition, the Company has adopted the provisions of Financial Accounting
Standards Board Interpretation (FIN) 44, Accounting for Certain Transactions
Involving Stock Compensation, which became effective July 1, 2000.  FIN 44
clarifies the application of APB 25 for certain issues.  Among other issues,
this interpretation clarifies the definition of an employee for purposes of
applying APB 25, the criteria for qualification of a plan as compensatory, the
consequences of modifications to the terms of a plan, and the treatment of
stock compensation issued to service providers who are not employees.  The
issuance of this interpretation does not change the current accounting policies
of the Company, and has had no affect on the accompanying financial statements.

                                         F-9
<PAGE>

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

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, 2001, 2000 and
1999, the Company's analyses indicated that there was not an impairment of its
long-lived assets.

The Company plans to adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets effective for periods beginning January 1, 2002 and
thereafter.  SFAS 144 replaces SFAS 121, and, among other matters, addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets.  SFAS 144 retains the basic provisions of SFAS 121, but broadens its
scope and establishes a single model for long-lived assets to be disposed of
by sale.  Management dos not believe adoption of the Statement will have any
effect on the financial statement of the Company.


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,
and SFAS No. 140, (by the same title and which replaces SFAS 125 for
transactions occurring after March 31, 2001).  These statements provide
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.  Adoption of these statements has had no affect on the financial
statements of the Company.

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.

                                     F-10

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

Revenue recognition
-------------------
The Company follows the provisions of SEC Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial Statements, and recognizes
revenues when its products are shipped to customers (terms are FOB shipping
point) at which time evidence exists of a completed transaction and
customer acceptance exists.  Appropriate provisions for estimated returns
of product and other allowances have been made in the accompanying financial
statements.  Amounts billed to customers for shipping and handling are
classified as revenues; while shipping and handling costs are included
in cost of sales.

Note B - Inventories:

Inventories consisted of the following at December 31, 2001 and 2000:

                                              2001             2000
                                           ---------       ---------
Raw materials purchased for blending        $361,867        $278,774
Merchandise available for sale               485,190         393,098
                                           ---------       ---------
                                            $847,057        $671,872
                                           =========       =========
Note C - Property and equipment:

Property and equipment consist of the following at December 31, 2001 and 2000:

<TABLE>                                            2001              2000
                                               ----------         ----------
      <S>                     <C>                  <C>                <C>
Land                                              $97,209            $97,209
Buildings and improvements   5 to 40 years      1,369,802          1,363,588
Machinery and equipment      3 to 10 years      2,381,139          1,888,457
Furniture and fixtures       5 to 10 years        489,915            486,078
Computers                    5 years               40,719                  0
                                               ----------         ----------
                                               $4,387,784         $3,835,332
Less accumulated depreciation                   1,676,619          1,303,331
                                               ----------         ----------
                                               $2,702,165         $2,532,001
                                               ==========         ==========
</TABLE>

Depreciation expense charged to operations was $393,784, $271,166 and $186,651
in 2001, 2000 and 1999, respectively.

                                       F-11
<PAGE>

Note D - Intangible assets:

Intangible assets consist of the following at December 31, 2001 and 2000:

<TABLE>
                                                   2001              2000
                                               ----------         ----------
  <S>                       <C>                    <C>                <C>
Goodwill                 15 to 40 years          $160,124           $160,124

Less accumulated amortization                      47,089             41,018
                                               ----------         ----------
                                                 $113,035           $119,106
                                               ==========         ==========
</TABLE>

Note E - Credit Agreement:

The Company has available at December 31, 2001, a revolving line of credit
with an asset-based lender due on May 1, 2002.   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, 2001 and 2000, 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, 2001, 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 and is
collateralized by certain accounts receivable and inventories.

Note F - Income taxes:

Income tax expense for the years ended December 31, 2001, 2000 and 1999
consists of the following:

<TABLE>
                                     2001            2000            1999
                                  ----------      ----------      ----------
   <S>                               <C>             <C>              <C>
U.S. federal - current              $189,100        $500,800        $536,398
U.S. federal - deferred               21,800         (97,000)          8,100
State - current                       26,300          29,691          53,632
                                  ----------      ----------      ----------
                                    $237,200        $433,491        $598,130
                                  ==========      ==========      ==========
</TABLE>

Income tax expense for the years ended December 31, 2001, 2000 and 1999
differs from the "expected" tax expense (computed by applying the 34% U.S.
federal corporate rate to income before income taxes) as follows:

<TABLE>
                                    2001             2000            1999
                                  ---------       ----------       ----------
  <S>                                <C>              <C>             <C>
Computed "expected" tax expense    $203,072         $414,599         $559,705
Amortization of goodwill                939              703              939
State income taxes, net of federal
   benefit                           17,358           19,596           35,397
Other                                15,831           (1,407)           2,089
                                  ---------        ---------        ---------
                                   $237,200         $433,491         $598,130
                                  =========        =========        =========
</TABLE>
                                      F-12

<PAGE>

Note F - 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, 2001 and 2000 are presented below:

<TABLE>
                                                     2001            2000
                                                  ----------      ----------
  <S>                                                 <C>             <C>
Deferred tax assets:
  Accounts receivable, principally due to
    allowance for doubtful accounts                 $164,000        $169,000
  Overhead allocation to inventories under IRC 263a   66,300          40,400
  Accrual of environmental remediation liability      85,000          85,000
  Expense resulting from issuance of stock
    options and warrants                              35,600          35,450
                                                  ----------      ----------
Total gross deferred tax assets                     $350,900        $329,850
Less valuation allowance                                   0               0
                                                  ----------      ----------
Net deferred tax assets                             $350,900        $329,850
                                                  ----------      ----------
Deferred tax liabilities:
  Property and equipment, principally due to
    differences in depreciation                    $(111,600)       $(68,900)
  Other                                                 (700)           (550)
                                                  ----------       ---------
Total gross deferred tax liabilities               $(112,300)       $(69,450)
                                                  ----------       ---------
Net deferred tax asset                              $238,600        $260,400
                                                  ==========       =========
</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, 2001, to be realized as a result of future taxable income.

                                   F-13
<PAGE>

Note G - Stockholders' equity:

Stock equivalents at December 31, 2001, 2000 and 1999, and changes in stock
equivalents for the three-year period ended December 31, 2001, are presented
below:

<TABLE>
                                   Stock options           Stock warrants
                                  -------------------    -------------------
                                             Weighted               Weighted
                                              Average                Average
                                  Number of  Exercise    Number of  Exercise
                                    Shares     Price       Shares     Price
                                  =========  ========    =========  ========
 <S>                                 <C>        <C>         <C>        <C>
Options and warrants
  outstanding, December 31, 1998    703,969     $0.63            0     $0.00

                         Granted     20,000      4.38       10,000      4.75
                       Exercised     (4,791)     0.50            0      0.00
              10% stock dividend     71,914      0.73        1,000      4.75
                                  ---------               --------
Options and warrants
  outstanding, December 31, 1999    791,092      0.73       11,000      4.75

                         Granted     42,000      2.88            0      0.00
                                  ---------               --------
Options and warrants
  outstanding, December 31, 2000    833,092      0.84       11,000      4.75

                         Granted     55,000      2.02       10,000      2.20
                                  ---------               --------
Options and warrants
  outstanding, December 31, 2001    888,092      0.92       21,000      3.54
                                  =========               ========
</TABLE>

The weighted average exercise price of all exercisable options at December 31,
2001, 2000 and 1999, was $0.77, $0.84 and $0.73, respectively.  The weighted
average exercise price of all outstanding options at December 31, 2001, 2000
and 1999 was $0.92, $0.84 and $0.73, respectively.

Stock option plan

The Company has a non-qualified stock option plan (Plan) covering approximately
957,000 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.  The Plan provides that the contractual lives of the options are
ten (10) years unless otherwise stipulated 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.

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,
2001, 24,027 of these options had been exercised; 702,542 options remain
outstanding.

                                  F-14
<PAGE>

Note F - Stockholders' equity (continued):

At December 31, 2001, 2000 and 1999, all of these options were fully vested
and exercisable.  The remaining weighted- average contractual life of these
options was 3.2 years at December 31, 2001.

$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, 2001, none of these options have
been exercised and 66,550 remain outstanding.  At December 31, 2001, 2000 and
1999, all of these options were fully vested and exercisable.  The remaining
average contractual life of these options was 5 years at December 31, 2001.

During January 2001, the Company granted 45,000 stock options to certain key
employees of the Company.  These stock options vest in annual increments of
20% with the first 20% vesting occurring on the date of issuance.  At December
31, 2001, none of these options have been exercised; 45,000 remain outstanding
and 9,000 were exercisable.  The remaining average contractual life of these
options was 9 years at December 31, 2001.

$2.125 stock options
-------------------
In March 2001, the Company granted 10,000 stock options to an employee of the
Company.  These stock options were issued at an option price of $2.125 per
share and vest in annual increments of 20% with the first 20% vesting occurring
on the date of issuance.  At December 31, 2001, none of these options had been
exercised; 10,000 remain outstanding and 2,000 were exercisable.  The remaining
average contractual life of these options was 9 years at December 31, 2001.

$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,
2001, none of these options had been exercised and 22,000 remain outstanding.
At December 31, 2001, 2000 and 1999; 16,500, 11,000, and 5,500, respectively,
were exercisable.  The remaining average contractual life of these options
was 7 years at December 31, 2001.

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

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.  These warrants were valued at
$0.62 per share using the Black Scholes option-pricing model.  Assumptions
included an expected dividend yield of 0.0%, a risk-free interest rate of
4.81%, an expected life of 2 years and an expected volatility of 46.04%.  At
December 31, 2001, 2000 and 1999, none of these warrants had been exercised;
11,000 remain outstanding and all are exercisable.  The remaining average
contractual life of these warrants was 7 years at December 31, 2001.

In July 2001, 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 $2.20 per share.  These warrants were valued at $1.14 per share
using the Black Scholes option-pricing model.  Assumptions included an expected
dividend yield of 0.0%, a risk-free interest rate of 3.53%, an expected life of
5 years and an expected volatility of 56.24%.  At December 31, 2001, none of
these warrants have been exercised; 10,000 remain outstanding and all are
exercisable.  The remaining average contractual life of these warrants was 9
years at December 31, 2001.

                                      F-15
<PAGE>

Note G - Stockholders' equity (continued):

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

Note H - Proforma information related to stock options:

The per share weighted-average fair value of stock options granted during 2001,
2000 and 1999 was $1,27, $1.99 and $1.94, respectively, on the date of grant,
using the Black Scholes option-pricing model. The following weighted-average
assumptions were used in the pricing model:

<TABLE>
                                    2001          2000           1999
                                 ----------     ----------    ----------
  <S>                                <C>           <C>           <C>
Expected dividend yield             0.00%         0.00%          0.00%
Risk-free interest rate             5.34%         6.66%          4.84%
Expected life                     7 years       7 years        7 years
Expected volatility                56.24%        70.98%         45.84%

</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>
                                      2001           2000             1999
                                  -----------     -----------     -----------
  <S>                                <C>              <C>             <C>
Net income:
   As reported                       $360,072        $785,918      $1,048,062
                                   ==========      ==========      ==========
   Proforma                          $325,555        $758,772      $1,037,796
                                   ==========      ==========      ==========
Basic earnings per common share:
   As reported                          $0.11           $0.24           $0.32
                                   ==========      ==========      ==========
   Proforma                             $0.10           $0.23           $0.32
                                   ==========      ==========      ==========
Diluted earnings per common share:
   As reported                          $0.10           $0.22           $0.29
                                   ==========      ==========      ==========
   Proforma                             $0.09           $0.21           $0.28
                                   ==========      ==========      ==========
</TABLE>

Proforma net income reflects only options granted in 2001, 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-16
<PAGE<

Note I - Quarterly financial data (unaudited):

Quarterly net income and earnings per share for 2001 are as follows:

<TABLE>
                                                       Earnings per share
                                                    -------------------------
                                Net income            Basic          Diluted
                               -----------           ---------      ----------
  <S>                              <C>                <C>               <C>
First quarter                     $269,832            $0.08             $0.07
Second quarter                      (6,254)           $0.00             $0.00
Third quarter                      211,171            $0.06             $0.06
Fourth quarter                    (114,677)          $(0.04)           $(0.03)
                               -----------
                                  $360,072
                               ===========
</TABLE>

Note J - Commitments and contingencies:

Legal actions
-------------

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.

During the year ended December 31, 2001, the Company reached a final settlement
with respect to a lawsuit brought against it.  The cost to the Company was
$125,000, which was paid and charged to operations during the year-ended
December 31, 2001.

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.

On March 2, 2001, the Company notified the Texas Natural Resource Conservation
Commission (TNRCC) of the results of this investigation and that it intended to
apply for the Voluntary Cleanup Program during 2001.  In July 2001, the TNRCC
accepted the Company's application into the Voluntary Cleanup Program and
approved its proposal.  The stipulations of the proposal require the Company
to conduct more extensive environmental studies into the contamination and to
report the findings to the TNRCC in June 2002.  In addition, the Company has
agreed to produce recommendations for the cleanup, should any cleanup be
necessary based on the ongoing investigations.  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.

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 accurately estimate the
amount of suchliability because the discovery is still in an investigatory
stage and the extent of possible contamination has not been determined.  In
addition, the Company has not been subjected to any claims or assessments
with respect to this environmental issue.

Nevertheless, the Company believed it was appropriate to provide for the
anticipated financial effects of this matter at the date of its discovery in
order to more accurately reflect its liabilities.  Based on information
available, management determined that $250,000 was its best estimate of the
costs for continuing investigation and potential remediation.  Accordingly,
$250,000 was accrued and charged to operations during the year ended December
31, 2000.  Management's estimate of potential future costs remains at $250,000
as of December 31, 2001.  It is at least reasonably possible that this estimate
of future costs will change and the change could be material.

The Company incurred costs of $20,000 and $35,000, respectively, with respect
to investigation of the potential environmental contamination, which have been
expensed for the years ended December 31, 2001 and 2000.

                                     F-17
<PAGE>
Note J - Commitments and contingencies (continued):

Examinations by tax authorities
-------------------------------

The Company is currently undergoing examinations by various taxing authorities,
including the Internal Revenue Service for the year ended December 31, 1999,
and the State of Texas for the years 1998 through 2001.  Various issues have
been raised which the Company is not in agreement with and is contesting
through informal conferences at this time.  The examinations have not been
completed and management has been unable to determine the likelihood or extent
of an unfavorable outcome to the Company, and, as such, has not accrued any
amounts in the financial statements as of December 31, 2001.

Commitments
-----------

The Company is obligated under operating leases for equipment through August
2004.  Minimum annual rentals under such arrangements are as follows:

<TABLE>
                   Year ending
                   December 31,                        Amount
                   ------------                      --------
                      <S>                               <C>
                      2002                            $47,041
                      2003                             40,015
                      2004                             10,152
                                                      -------
                      Total                           $97,208
                                                      =======
</TABLE>

                                     F-18
<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:  April 12, 2002

	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		   }	  April 12,
			         (Principal Executive Officer)	   }    2002
								               }
/s/ Fred Kenner
-------------------         Director, President and            }
Fred Kenner         	    Chief Operating Officer		   }
				    (Principal Financial and      	   }
				    Accounting Officer)          	   }
								               }
                                                               }
-------------------          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. (4)

10.19 Arrow-Magnolia International, Inc.  Amended and
      Restated Non-Qualified Stock Option Plan (6).

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.

(6)  Filed as Exhibit 10.19 to Arrow-Magnolia International, Inc. Form 10-KSB
     for the fiscal year ended December 31, 2000 filed on April 2, 2001 and
     incorporated herein by reference.