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Swirl used the $600,000 for working capital. Swirl reported
the transaction as a loan from stockholders in its financial
statements dated December 31, 1986, June 30, 1987, and
December 31, 1987.
Swirl paid interest to petitioner quarterly. Swirl paid
about $56,841 in interest on the notes, from November 1, 1986, to
July 2, 1988. In April 1987, petitioner and Swirl changed the
maturity date on the notes from April 1 to September 15, 1988.
Later, they changed the maturity date from September 15 to
October 15, 1988.
F. Petitioner and His Brother's Resignation From and Sale of
Swirl
1. Sale of Swirl
On May 13, 1988, Swirl, Swirl Sales, Easley, Chemical Bank,
petitioner, and petitioner's brother agreed to restructure some
of Swirl's debt to Chemical Bank. Shortly thereafter, Chemical
Bank told petitioner that it wanted to end its lending
relationship with Swirl.
Swirl hired Anthony Gasson (Gasson) in July 1988, to arrange
new debt financing for Swirl. Gasson specialized in finding
buyers and lenders for troubled companies. Swirl hired Joseph
Santalarsci (Santalarsci), an investment banker, in September
1988 to find a buyer for Swirl.
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