James Tinnell - Page 4

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          II.  Zila Pharmaceuticals, Inc.                                             
               In 1974, petitioner relocated his medical practice from                
          Chattanooga, Tennessee, to Las Vegas, Nevada.  In conjunction               
          with his medical practice, petitioner began doing research on               
          herpes.  During the late 1970's, petitioner invented a cream                
          called Herpaway (cream) for the topical treatment of herpes.                
               In September 1980, petitioner and his partner, Dr. Edwin D.            
          McKay, formed a pharmaceutical manufacturing business called Zila           
          Pharmaceuticals, Inc., a Nevada corporation, to manufacture and             
          distribute the cream.5  Effective September 1, 1988, Zila                   
          Pharmaceuticals, Inc., became a wholly owned subsidiary of Zila,            
          Inc. (Zila), a Delaware corporation.  Today, the cream is called            
          Zylactin and is being sold as an over-the-counter treatment for             
          herpes.  At the time of trial, Zila had over 200 employees and a            
          market capitalization of approximately $200 million.  At all                
          relevant times, petitioner has received royalties from Zila from            
          sale of the cream.                                                          
          III.  Petitioner’s Mining Activities                                        
           A.  Commencement of Petitioner’s Mining Activities                         
               In 1978, petitioner began reading prospecting books and                
          became interested in mining.  Petitioner attended shows and                 
          seminars about mining and purchased numerous books on geology and           

               5Before the formation of Zila Pharmaceuticals, Inc.,                   
          petitioner acquired a corporate shell company called Dusenberg              
          Replicar, which later became Zila Industries.                               

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