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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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