Markets Linx Technologies' principal markets are financial and general business, as well as individual consumers. However, the Company's customers include virtually every segment of American business.

Hardware business Division
Through great effort and careful consideration, Linx was able to increase the product innovation of this division resulting in a superior product with lower manufacturing expenses. Today, it is still our least profitable division but is steadily rising. Earnings Before Interest and Taxes of $453,000 in 1998 have increased by 33% to $601,000 in 2000. Today, the hardware division accounts for 25% of the corporation's overall success. This is illustrated in our divisional performance chart.

Software business Division
The strategy for the software division has remained fairly stable since the start of the company with steady increase. It is our second strongest division bringing in 33% of the profits for the year 2000. EBIT of $775,000 in 1998 have increased to $781,000 in 2000. Our plans for this division include more product innovation and expansion. The concept of foreign markets is a key priority for the upcoming year.

Systems Operations Division
The Systems Operations Division of Linx is by far the strongest; accounting for 41% of the corporation's profits this year. The division's individual EBIT have increased 16% from $838,000 in 1998 to $972,000 in 2000. Systems Operation's will continue to be our main focus in the future.

Linx Technologies, Inc. as a whole
Our corporation began in 1995 with an initial stock price of $6.06, and is currently trading at $25.46. This increase of 420% is attributable to a strong management team and superior products. Our main focus in the birth of our corporation was to maintain financial stability while creating wealth for our shareholders. In order to do this, we kept our prices competitively high with limited expansion in order to reduce overhead expenses.
After a comfortable level of financial stability was reached, we were then able to give back to the shareholders in dividend payments. In 2000, 23% of net earnings were distributed as dividends. This is consistent with our dividend policy, which suggests that dividends be paid yearly at a level between 15-25% of net earnings. Our dividend payout ratio trend can be viewed on our ratio chart, which also includes other ratios that will shortly be discussed. Our return on equity in 2000 is 12.97%, which is 2% higher than 1999. Although our ROE is below the industry average, Linx has steadily increased return on equity and should reach a ROE of 18% by 2003. Our goal is to focus on these returns in the upcoming years. Please refer to our ratio chart to see our illustrated return on equity ratio.
In an effort to reduce the level of debt in our capital structure, management focuses on the firm's debt-to-equity ratio. In 2000 our debt-to-equity ratio was 1.13, which is a 22% decrease from 1999. Again, please refer to our ratio chart to access the debt-to-equity ratio. As illustrated, we are continuing to reduce debt until we reach a debt-to-equity ratio of at least 1. As suggested by our current ratio, we are in a comfortable financial position and could assume more liabilities if need be. The current ratio trend is also available on our ratio chart. Another are focus for management is accounts receivable turnover. We feel it is important to monitor accounts receivable closely to ensure that we are collecting on time and extending credit to reliable customers. Our accounts receivable turnover has remained very steady over the last three years with only slight increases, and is at 6.64 today. The accounts receivable turnover number is accessible on the ratio chart.
Our ending cash in 2000 is $40,000, which is $24,000 less than 1999. Decreasing this number remains high priority for us. We feel that maintaining a large cash account, we are forgoing investment opportunities which the cash could provide. Please take a look at the cash flow statement illustrated in our financial records.
Our earnings have steadily increased over the past few years and increased 31% this past year alone. This increase was accompanied with only a slight increase of our expenses. However, earnings have increased significantly in direct contrast to our interest expense, which has steadily decreased as we continue to eliminate debt in our capital structure. This contrast is illustrated in a comparison chart located in our financial section. Another source is our [consolidated statement of earnings].

Growth remains a high priority

We have made substantial investment in product development and nurturing of the high-potential parts of our enterprise. Human resource development is very important to us, for it is our employees that make this corporation. Our sales have remained steady over the past 3 years, with only a 3% increase in sales growth in 2000. Our goal is to raise sales by expanding into new markets. We plan on exploring the areas of Exporting, starting with Canada and Mexico, and then working on globalization. Relying on previous data and trends, our estimated sales in the year 2010 will be over 25,000, which is a 48% increase from 2000. Please refer to our Pro Forma statement in our

financial records for further estimations. We want to put more emphasis on our hardware division and will possibly pursue outsourcing to aid us in this. Linx is a young company with a great deal of potential and we plan on meeting that potential every step of the way.

Enter our tradition of innovation
It's in an atmosphere of innovation that we develop and produce value-added products and systems. Products that increase the performance of our customers, while providing reasonable margin growth for you, our shareholders. We will continue to provide an environment that encourages innovation. One that will accept an occasional failure to meet our expectations, encouraging our people to achieve their maximum potential.

Annual Meeting
The Annual Meeting of Shareholders was held Wednesday, April 21, 1999, at 11:00 a.m. in Baton Rouge, LA. A formal notice was mailed to each shareholder of record prior to the meeting.