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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Michael Davis who wrote (129)	10/10/1998 4:10:00 PM
From: Zeev Hed	Respond to of 1438

Michael, RNTK has a "leaky floorless preferred " Look at the latest s-3 filing of RNTK to see the details. In essence, they issued $2 MM in floorless convertible preferred to which are attached floorless warrants and the same amount of additional floorless preferred. It is up to company to "draw" on this, they have drawn on somewhat more than the first $2 MM I believe and I do not know how much was converted . Zeev

To: Michael Davis who wrote (129)	10/11/1998 9:55:00 AM
From: ChrisJP	Read Replies (3) \| Respond to of 1438

Hi Michael, I'm not sure if Zeev's answer to your question regarding RNTK was satisfactory. Here is a short version of the full story: A while back, RNTK authorized the issuance of 1,000,000 Series A Prefered, and 800,000 Series B Prefered. I'm not 100% sure about these numbers, but I know I'm in the right ballpark. Back in January they sold 200,000 Series A (for about $2M) which gave the purchasers warrants to purchase 200,000 Series B this summer (which they exercised). I'm guessing, based on the activity we saw in late Sept. the prefered holders have converted all of this. RNTK's August 10-Q gave no hint of further prefered stock sales, but we will have to wait for RNTK's next 10-Q to know what the status is. Based on bits and pieces of info I have collected, I suspect that RNTK just recently issued some more Series A, which could cause some more dilution. With the Texaco deal signed, a little more dilution will have little to no effect of the stock price (maybe 1/4 point). The question is, will RNTK need to issue more Series A down the road and thereby continue a downward spiral in stock price ? Or will royalties (or the expectations of royalities) kick in and create a revenue stream which supports the stock price ? Zeev contends that from April to Sept, the floorless drove RNTK down from $3 to $1. This is not completely true. RNTK experienced a speculative frenzy in the Spring which artificially drove the price up (from under $1 to $3.25) well above what it should have been. Without the mania, RNTK would never have traded over $1.50 or so. However, there is no doubt in my mind that the Prefered Shareholders took advantage of this and shorted RNTK for a fabulous profit. With or without the mania, the result was the same; they were able to short the stock down to under $1. Also, if there is no news in the near future to drive the stock upward, the Prefered Shareholders might very well start shorting again in an attempt to maximize their return on their investment. IMHO, if Texaco gave RNTK a bunch of money upfront when they signed the deal, then the stock will probably be OK, since it will be over a year before they would need to raise money by issuing Prefered Shares. By then royalties will kick in to pay the bills. If RNTK didn't get a cash infusion from Texaco ....... The news release from RNTK I'd LOVE to see is the cancellation of the Prefered Shares. If their success is assured, they should have no problem doing this. If they have a decent deal with Texaco, they should be able to borrow with conventional financing and pay the loans back with future earnings. This would end the floorless threat once and for all. Regards, Chris