Labelgraphics, Inc. - Page 7

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          petitioner's clean room labels.  Although electronics companies             
          could use normal labels to identify and package sensitive                   
          electronic components they manufactured in their clean rooms, the           
          normal labels themselves would contain contaminants.                        
               The materials used in and the processing for petitioner's              
          clean room labels are quite different from that of normal labels.           
          Clean room label production requires a special cleaning machine             
          that petitioner devised to clean labels after their manufacture             
          and before their packaging.  In addition, the labels employ a               
          special adhesive that petitioner developed with the assistance of           
          outside adhesive consultants and chemists.                                  
               Mr. Martin was instrumental in developing the Micro Clean              
          100 process.  In 1989, it was he who envisioned a process to                
          produce labels to clean room standards, initiated the engineering           
          program for its development, and saw the program through to a               
          successful conclusion in early 1990.  He and petitioner's staff             
          engineer worked on the label-cleaning machine petitioner devised.           
          He and certain other of petitioner's employees refined the                  
          process for producing clean room labels and worked with outside             
          consultants and chemists to develop the special adhesive the                
          labels required.                                                            
               Petitioner sold its first clean room labels during the first           
          half of 1990.  For its fiscal year ended June 30, 1990, its sales           
          of clean room labels totaled $32,639.  In June 1990, petitioner's           
          directors anticipated that clean room labels would produce                  

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