The peril of private investors...
The reason ImjinBridger said "Any shareholder equity would be long gone by now" is probably because private investors would not simply give the money to KBLB, no questions asked. They would want something in return. There are only three things that KBLB could give to private investors:
1) a bunch of common stock, typically at a discount from the current share price.
2) a bunch of preferred stock, which would mean they are first in line for dividends, receive larger dividends, and dividends paid at regular intervals.
or
3) a loan against the company's assets.
Suppose you were considering a $5 million stake in KBLB.
1) Exchange funds for common stock: At a (discounted) $0.015 cents/share rate, that would mean you now have 333 million shares of a company with more than a billion shares outstanding. This is not a controlling interest, but represents a considerable amount of share dilution. An investor would likely be worried that they could lose their whole investment if the company went bankrupt and also about continuing share dilution. The "Calm Seas" arrangement is exactly of this sort. KBLB is selling them $100K/month of common stock, which is causing stock dilution. As we are not talking about $5 million here, this arrangement is working.
3) A loan against assets. KBLB has some silkworms and some patents pending. As an investor, what value can you place on these assets? Are you willing to risk $5 mil that the silkworms will produce commercial quality silk when they have not done so to date? The patents haven't been awarded yet and may not come through. Most investors would not want to take that risk.
2) A bunch of preferred stock. An investor would see this as the best way to protect their investment. In the case of bankrupcy, they would be first in line for any assets. In case the company makes a profit, they are first in line for dividends.
There is a door number 4 as well: buy out the company for a bargain price (1 cent a share?), stiff all the stockholders, but make a deal with Kim Thompson. Offer him a job in the new company.
This helps us to understand ImjinBridger's comment. If private investors want preferred stock, the value of common stock would plummet. Our shareholder equity would be gone.
