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they used the Corporation’s funds to pay a majority of the
Partnership’s expenses.
Also in late 1990, the Laurel Assets Group (LAG), an
unrelated investment group, expressed interest in investing in
the Corporation. Mr. Lettunich met with representatives of LAG
to discuss its interest, and LAG advanced $150,000 to the
Corporation on December 19, 1990. LAG and the Corporation agreed
that the Corporation would repay LAG the $150,000, with interest,
by December 31, 1991, if they did not reach an investment
agreement by January 31, 1991. As of December 19, 1990, LAG and
the Corporation believed they would agree to an investment of up
to $350,000 by January 31, 1991, at which time they would
consider the $150,000 part of that investment.
Mr. Schadeck applied to patent his idea on February 8, 1991.
He transferred his rights in that application to the Partnership
approximately 1 year later, and the Partnership immediately
assigned those rights to Magnitude Technologies Incorporated
(Magnitude), a corporation whose shareholders were the
individuals.
LAG advanced another $200,000 to the Corporation in the
first half of 1991, making LAG’s total advance $350,000. The
Corporation asked LAG to take an interest in the Partnership in
consideration for the $350,000. LAG asked that the $350,000 be
converted into a royalty arrangement.
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