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existing operations would need to be maintained; (3) adequate
reserves to accommodate planned sales expansion and product-line
expansion (forecasted to be substantial for the 5 years following
the August 31, 1986, meeting) would need to be maintained; (4)
reserves to facilitate the anticipated construction of a major
warehouse facility would need to be set aside; and (5) adequate
reserves to facilitate expansion of petitioner's operations
overseas would need to be established.
The dividends paid by petitioner during the fiscal years at
issue were:
Shares Dividends Dividends
FYE Outstanding Paid Per Share
7/29/90 60 $48,000 $800
7/28/91 60 48,000 800
8/02/92 30 24,000 800
Mr. Bennett, petitioner's president, and Mr. Sokol,
petitioner's treasurer (and later vice president), were
authorized to receive salaries for their day-to-day work as
petitioner's employees. Nevertheless, in order to maintain
adequate cash flow at the beginning of petitioner's operations,
Mr. Bennett waived any salary payments through January 1, 1980.
As reflected in the minutes of petitioner's annual meeting of
directors on June 29, 1979, Mr. Bennett further agreed to accept
only $1,000 as monthly compensation after January 1, 1980, in
return for a resolution on behalf of petitioner to "more
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