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Varchild2008 (84.02)

ADSI's Preferred A Share deal is a good one with 1 Caveat



May 26, 2009 – Comments (5)

Reading through this confusing Preferred A Share situation that was recently negotiated I come to some conclusions and thoughts.

ADSI or American Defense Systems Inc.  is a defense stock that specializes in Crew Protection Kits, Bullet Proof Windows and armored doors, among other products and training programs.

The company has been involved in a sticky situation with West Coast Partners related to converting the preferred shares for Cash along with the payment of dividends.

The Dividends for 2009 per the negotiated agreement have been paid off....
50% of the Shares is to be converted by Dec. 31st, this year.

The interesting thing is that the dividends were paid by giving common stock to the preferred share holders at an exercise price of 60 cents (a bargain price given it's 72 cent price today).

What happens if the entity or entities want to convert their common stock to cash?

I guess that's the bad news for all shareholders... But it's just a short term OMG! factor in a long term story.  The massive shares would get dumped for cash in a steady stream of sell offs and could lower the share price dramatically in the short term.

But... once you get past the sell-off.... assuming they decide to sell the stock for cash...then everything goes back to normal.

Except there's still a 375,000 common stock bag given in converting the 3.75 million $$ worth of Warrants to Common Stock at .01.

So... if that gets sold off for cash at or near the same time the Dividend to Common Stock gets sold then you have an even bigger dilluge of sell-off taking an even longer time to finish.

3-6 months?  6-12 months?   1 investor sold off thousands upon thousands of (GENC) common stock and it took dang near 6-8 months to complete.... resulting in one massively undervalued share price for GENC for a really long time.

Of course all this is pure specualtion and guess making by someone who has already said they know NOTHING about how this confusing stuff works... But just B-Sing around about it on here does help me prepare myself if the share price plummets off huge volume and there's no press release justifying it.

5 Comments – Post Your Own

#1) On May 26, 2009 at 2:28 PM, Varchild2008 (84.02) wrote:

OOPS! see how stupid I am?

3.75 million at .01 price =  375 million!  not thousand.  darn typo.

Anyhow... That's far more shares that the outstanding common stock share amount indicates.

All I see is massive share dillution beyond one's wildest dreams here.... But, this stuff is beyond my ability to comprehend so I could be wrong.

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#2) On May 26, 2009 at 3:32 PM, Mary953 (85.18) wrote:

Thanks .  The best thing to do when you see something that calls for a "What's that?"  reaction is to go find someone who knows.  I figured you would know.  At least now I know what's going on.

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#3) On May 26, 2009 at 4:34 PM, Varchild2008 (84.02) wrote:

Sorry to disappoint.  But I don't know.  I'm just hanging in there with all the others out there who don't know.

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#4) On May 26, 2009 at 6:05 PM, Varchild2008 (84.02) wrote:

Disclosure!  I bought 400 shares of EAG after selling 45 shares of HOTT today.

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#5) On May 26, 2009 at 6:33 PM, Mary953 (85.18) wrote:

LOL, my own disclosure, I checked your other blog to see if you had responded to my question about EAG (which was off topic for that blog, but I didn't know where else to put it) and realized that I never hit post.  You were not answering my question after all.  You just keep a really close eye on your investments as I do on mine.

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