Consolidated Manufacturing, Inc., M. P. Long Living Trust, Merl Philip Long, Trustee, Tax Matters Person - Page 6

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          of, inter alia, cores (unprocessed cores raw material inventory)            
          and new parts (unprocessed new parts raw material inventory) upon           
          which it drew throughout the remanufacturing process.                       
               During Consolidated's remanufacturing process, Consolidated            
          incurred expenditures for labor and overhead and transformed                
          those raw materials into its finished goods or products (viz,               
          remanufactured automobile parts).  During that process for                  
          certain automobile parts, new parts were physically affixed to              
          and incorporated into a core in order to produce a remanufactured           
          automobile part.  The new parts used by Consolidated in the                 
          remanufacturing process included pistons and rings, rockers and             
          lifters, springs, bearings, chains, gears, plugs, pins, and other           
          miscellaneous assembly parts.  Consolidated purchased the new               
          parts that it used in its remanufacturing business from the                 
          manufacturers of such parts.                                                
               Consolidated generally obtained cores from two sources.                
          Consistent with customary and established practice in the                   
          automobile parts remanufacturing industry, Consolidated acquired            
          most of its cores from its customers (customer cores), whose                
          source for those cores was their respective customers.                      
               Consolidated also acquired cores, except small part cores,             
          from persons engaged in the business of selling cores and known             
          in the automobile parts remanufacturing industry as core                    
          suppliers or core brokers (core suppliers).  (We shall refer to             
          the cores obtained from core suppliers as core supplier cores.)             




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