Koil Energy Solutions, Inc. (KLNG) is a micro-cap offshore energy services provider (subsea umbilicals, distribution systems, tie-back support) with operations in the US and Brazil. As of March 31, 2026, total assets were $21.6M against total liabilities of $12.2M, producing GAAP book equity of $9.4M. Under a liquidation lens, recovery to equity is materially negative, consistent with the MFFAIS CLV of approximately negative $14.3M and LLV of approximately negative $9.5M. The asset haircut math is the primary driver: cash of $1.2M recovers at par; AR of $7.5M (net of $569K allowance) recovers roughly $6.8-7.1M at 90-95%; inventory of $675K recovers approximately $405K at 60%; contract assets of $2.2M and PP&E net of $3.6M collectively recover at steep discounts or zero — contract assets are billings-in-excess claims contingent on customer performance (zero to minimal recovery on wind-down), and PP&E gross of $9.7M against $6.1M accumulated depreciation implies a book-to-gross ratio suggesting highly depreciated specialized equipment with uncertain secondary market value (50% haircut on $3.6M net yields approximately $1.8M). Intangibles of $393K (capitalized software, patents) recover at zero. ROU operating lease assets of $5.6M are offset dollar-for-dollar by operating lease liabilities at face of $6.4M total, net negative. On the liability side, total operating lease obligations stand at $6.4M (combined current and long-term, weighted average remaining term 6.0 years at 7.45% discount rate); undiscounted future operating lease payments total $8.0M through 2032+. These obligations do not extinguish on wind-down and represent the dominant drag on liquidation recovery. No funded debt is present; the factoring line was nearly fully repaid by period-end ($8K outstanding vs. $541K at December 31, 2025). AP and accrued liabilities rose to $4.3M from $3.1M QoQ, consistent with higher project activity but adding to the current liability stack. Contract liabilities jumped to $943K from $172K, representing billings-in-excess that would require either performance or cash repayment in liquidation. The accumulated deficit stands at $62.3M, reflecting years of losses. A material weakness in internal controls over financial reporting was disclosed (unremediated as of March 31, 2026, remediation targeted for fiscal year-end 2026). The OMSi receivable ($569K fully reserved) remains subject to collection uncertainty despite a US District Court judgment. No traditional secured debt facility exists — the Amegy factoring arrangement (Prime + 2%, floor 8%) is the only external credit line and was nearly extinguished at period-end. QoQ improvement: current period operating income was positive $273K vs. operating loss of $75K in Q1 2025, and the factoring balance dropped sharply, both modestly positive signals for going-concern but immaterial to the liquidation deficit. Filing discusses deferred tax assets of approximately $8.4M gross (full valuation allowance applied) and NOL carryforwards of $24.7M US federal in MD&A and footnotes but these are not separately XBRL-tagged in TAG_CONTEXT and carry zero liquidation value under the haircut framework. The MFFAIS liquidation values (CLV negative $14.3M, OLV negative $9.1M) are directionally consistent with this analysis: the operating lease liability stack alone exceeds the aggregate liquidation-adjusted asset base by a meaningful margin.
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