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securities dealer) incurred considerable monthly overhead and
marketing expenses. From 1994 through 1996, CKS had 10 to 15
branch offices around the country and over 150 employees,
including a large sales staff. In addition to marketing the
JetFleet I, JetFleet II, JetFleet III, and other securities
products, CKS’s business also included the marketing of bonds.
Crispin was aware of Cap Corp.’s inability to pay its
expenses and Cap Corp.’s need for advances to pay those expenses.
Koehler asked Crispin to supply operating capital for Cap Corp.
Crispin arranged for petitioner to advance funds to Cap Corp. to
pay its day-to-day operating expenses. Through January 1, 1995,
petitioner advanced $858,991 to Cap Corp.10 On April 30, June
30, and August 31, 1995, Cap Corp. made payments to petitioner
totaling $593,834, leaving a $515,825 balance as of August 31,
1995. From September 1995 through November 30, 1996, petitioner
advanced an additional $2,060,425 to Cap Corp. without
considering accrued interest. As of November 30, 1996, Cap Corp.
owed petitioner $2,759,903.
Cap Corp. issued a January 1, 1995, promissory note to
petitioner concerning the January 1, 1995, through November 30,
1996, advances. This promissory note in pertinent part stated:
10Except as where otherwise indicated, for convenience these
amounts in controversy that petitioner advanced have been rounded
to the nearest $1.
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