Paul G. Gubbini - Page 4

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          was resolved.  He, however, did not have the necessary resources            
          to exploit his rights in the patent.  Petitioner was willing to             
          put money into Leland Prentice’s business in order to share in              
          the profits when it became successful.                                      
               During October or November 1987, Color Trick was organized             
          pursuant to Florida law.  Leland Prentice and his wife, Faye                
          Prentice, were issued 700 shares of Color Trick’s stock, Leland             
          Prentice’s son, Stanley Prentice, and his wife were issued 100              
          shares, and petitioner was issued 200 shares, a 20-percent                  
          interest in the corporation.  Petitioner paid $5,000 for the                
          shares.  The directors of the corporation were Leland Prentice,             
          Faye Prentice, and petitioner.  Color Trick was an S corporation.           
          On January 28, 1988, Leland Prentice assigned the patent to Color           
          Trick.                                                                      
               From 1987 through 1989, petitioner advanced funds and made             
          and guaranteed loans to Color Trick.  Petitioner continued to               
          make loans to Color Trick because he believed its business could            
          be profitable.  Petitioner received promissory notes for some of            
          the advances and loans.  Petitioner’s loans and advances to Color           
          Trick were used to finance its operations and to purchase                   
          equipment.  From 1987 through 1989, petitioner devoted time and             
          effort to Color Trick’s business but received no compensation               
          from Color Trick.  During the period of its operation, Color                
          Trick experienced continuing difficulties due to lack of sales,             
          equipment problems, and an excessive number of employees.                   




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