Herold Marketing Associates, Inc. - Page 8




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          interest costs of $100,000 to maintain its cash balances in some             
          years, while generating savings of as much as $250,000 through               
          early payment discounts.                                                     
               3.  Petitioner's Operations, Financial Results, and Dividend            
          History                                                                      
               For 1985, 1992, and 1993, petitioner's gross receipts (net              
          of returns and allowances), gross income, book net income (before            
          deducting Herold's compensation), taxable income (before                     
          deducting Herold's compensation), Herold's compensation, and                 
          Herold's compensation percentages (rounded to the nearest dollar)            
          were:1                                                                       
          Taxable    Gross ReceiptsGross      Book      Taxable   Herold's             
           Year     (Net of Returns)   Income     Net Income    IncomeCompensation         
          1985      $826,544      $660,564     $135,565    $135,565$120,000             
          1992      37,162,286     4,336,752    1,296,512   1,356,628     1,200,000    
          1993      45,558,284     4,136,946    1,293,421   1,329,273     1,200,000    
                          Herold's Compensation Percentages                            
          Herold's Compensation Divided by:                                            
                         Gross                                                         
          Taxable        Receipts       Gross      Net Income     Taxable              
           Year           (Net)         Income     Per Books      Net Income           
          1985           14.52%         18.17%     88.51%         88.38%               
          1992           3.23           27.67      92.55          88.45                
          1993           2.63           29.00      92.77          90.27                





          1We use 1985 as the base year for comparison purposes.  That                 
          was the year immediately after Herold became petitioner's sole               
          shareholder.  At that point, petitioner had lost its sales                   
          representation arrangement with Apple, was facing the impending              
          insolvency of the three major Apple accounts it had been                     
          cultivating, and was starting over again essentially from                    
          scratch.                                                                     

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