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Additionally, the first amendment altered the amortized payments
if Research II exercised its option to restate principal as
follows:
6/30/85 $229,398.32
1/01/86 229,398.32
6/30/86 229,398.32
1/01/87 229,398.32
6/30/87 229,398.32
1/01/88 229,398.32
6/30/88 229,398.32
1/01/89 229,398.32
6/30/89 229,398.32
On the next day, September 28, 1984, Research II entered
into an exercise of stock agreement to purchase and purchased 7
percent of the stock of CemCom for $13,000. The stock purchase
was part of an overall series of stock purchases pursuant to
which Research I, Research II, Mr. Townsend, and another partner
in both Research I and Research II acquired over 50 percent of
the stock and voting control of CemCom.
On December 31, 1984, Research II elected to restate the
amount due under the research and development agreement as
principal. On February 6, 1985, Research II and CemCom entered
into a second amendment to the research and development
agreement reflecting Research II's election to restate the
principal amount due.
On its Federal income tax return for 1982, Research II
claimed a $2,806,250 loss consisting of a research and
development expense of $2,750,000 and miscellaneous expenses of
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