Labelgraphics, Inc. - Page 8

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          significant sales and profits in future years and would                     
          strengthen petitioner's competitive advantage in the industry.              
          Their assumption proved to be correct, as by 1995 the labels                
          accounted for approximately 30 percent of petitioner's sales and            
          were the fastest growing and most profitable segment of its                 
          business.                                                                   
               From 1990 through 1996, petitioner's annual sales and gross            
          margins from clean room labels were as follows:                             
                     Year       Sales      Gross Margin                               
               1990      $174,099       $102,196                                      
               1991       331,601        255,333                                      
          1992       450,856        360,685                                           
          1993     1,398,683      1,049,012                                           
               1994     1,828,637      1,371,478                                      
                    1995     3,954,393      2,965,794                                 
                    1996     5,116,026      3,990,500                                 
               During its fiscal year ended June 30, 1990, petitioner's               
          three officers were Mr. Martin, president; Jerry Crispe,                    
          executive vice president; and Mrs. Martin, secretary.  Of                   
          petitioner's officers, only Mr. Martin had substantial experience           
          in the label and printing industry before working for petitioner.           
          He designed petitioner's physical plant and layout.  He also                
          hired and trained the other members of petitioner's management              
          team, including Mr. Crispe and Mike.                                        
               When he began working part time for petitioner around 1982             
          or 1983, Mr. Crispe had no experience in the label and printing             
          business.  He previously had been in the real estate development            
          business and had some familiarity with general business matters.            



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