Replies to post #80836 on Koil Energy Solutions Inc. (KLNG)

[spec machine]

I think it probably is a carry over from "vapor" stocks that people may have the misconception that companies are created from thin air and the founders issue themselves millions of shares of stock for voting "present" at the first board meeting. I have seen cases where hundreds of million shares were issued for nothing more than a business plan.

The founders preferred shares in real companies are issued for the property and cash put into the business. Deep Down Inc. was a profitable ongoing company that R/M'd into a public shell with property, equipment, inventory, existing clients, and all of the incidentals that take time to get established. Preferred shares by definition carry a preferred claim on assets in case of liquidation.

Taking a company public has risks above what a private company has. The preferred status can be viewed as an "insurance policy" on the success of the move.

In the case of Smith/Budrunas, the shares were redeemed for common which surrenders the first claim on assets. Removing the preferred shares is beneficial in the sense that when financing acquisitions, lenders will not see other creditors being senior to them in case of default.

Looking back at the balance sheet at the time of the redemption before and after the event will show where the changes are in shareholder equity.

It is good to note that shareholder equity has increased during the 12 month period of June 07 to June 08 from -0.8M to 52.8M.

I don't have my other DPDW notes on this computer, maybe someone else can add to this.




I am a JOE (plumber or 6-pack, take your pick)

- POWERZONE - a mixture of pattern and chaos

[jdsgungho]

the conversion keeps them from having to purchase additional preffered shares each year which also increases equity and if the company were to go belly up then they would not have a gaurenteed payday by converting prefered to common. preffered shares are paid FIRST. so by taking common shares they have no preference and are in the same boat as you and i with each share being worth the current pps, whats not to get?

management also recently made a deal where they would each have the option to buy up to a million shares each, options that would not even be in the money until the 1.50 strike price.

in my opinion they have taken many steps forward in signaling their confidence in the growth of this company and with management holding somewhere around 70 million shares and not having sold one share also speaks volumes .

i personally have spoken with ron smith and can tell you those shares are going nowhere as his belief in this company is above and beyond and that includes the rest of management as well.

we have one of the strongest management teams around and each one of them is 110% committed in making this company a success, without taking the current share price into effect they have done everything possible to take this company to the top and it's in my opinion that over time their goals will be accomplished as they continue to strategically grow this company as they have done so already(JMHO)

[jdsgungho]

after reading your post again it appears to me you are under the assumption that they sold these shares which is incorrect. they still hold these shares and at this point are worth $9,570,615.70 if they sold them today, although that is still quite a premium over what the preffered share value was at $5,000,000 management has not sold one share to date and if the price were to continue to drop so does the value of their shares leaving no gaurentee which the preffered gave them.

the important part is they have sold NO shares