Edwin A. Helwig - Page 4

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          would have manufactured the wheel, and its profits might have                
          permitted K&H to recoup its costs.  The level of production                  
          necessary to permit K&H to recoup its costs was never achieved.              
               When K&H purchased materials to fulfill contracts with                  
          customers, to the extent that it had not been repaid and/or had              
          not yet billed the customer, K&H either treated the outstanding              
          amount as an asset or advance to the customer or, if it pertained            
          to research and development, claimed it as an expense.                       
               In one instance, K&H, at its own expense, built a dedicated             
          facility for Apple Computer (Apple), and then recouped its                   
          capital outlay by means of a production contract with Apple.  K&H            
          built conveyance, assembly, and painting equipment, and purchased            
          the enclosures that were delivered to K&H’s facility where they              
          were assembled, coated and/or painted, and then shipped to Apple.            
          The sales of the product to Apple permitted the recoup of its                
          capital outlay and also produced a 15-percent profit for K&H.                
               Hot Snacks, Inc. (Snacks), a C corporation, in January 1988,            
          commenced a business with the goal of creating a computer-                   
          controlled vending machine that would dispense a french fried                
          product, freshly fried in oil.  One of K&H’s employees brought               
          the opportunity in Snacks to petitioner’s attention.  This                   
          opportunity was part of K&H’s attempt to find new customers and a            
          source for revenue.  Petitioner invested $120,000 in Snacks at a             
          time when a prototype of the computer-controlled vending machine             

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Last modified: May 25, 2011