I read the proxy a couple times to fully digest the information. Here’s my interpretation:
1. The proposals are not in chronological order in the proxy in terms of how they will be executed. I see the order being – (i) Execute the preferred share conversion to eliminate the outstanding preferred shares, mostly owned by Morgan Paxhia, and convert them to common stock. (ii) Increase the authorized common and preferred share amount. (iii) execute r/s and reduce authorized shares. This is all part of having a pristine share structure.
2. The increase in the authorized shares appears to be for the purpose of aggressive expansion of operations to increase revenue/backlog conversion, increase sales volume and frequency, and for partnerships and acquisitions. To do this quickly, they will issues share to raise capital. They need more shares available in order to issue them. This comes at an interesting time, as the SAFE banking act will allow banks to work with cannabis related companies without consequence, which would significantly reduce the need for using shares as a tool to raise capital, though issuing share allows to quickly raise capital without adding debt to the balance sheet. This is all under the assumption that the SAFE act will pass in the short term.
3. After this aggressive expansion and using shares as currency, they will want to and need to clean up their share structure by reducing the number of authorized shares and outstanding shares to appeal to larger investors and institutions. Therein lies the need to execute a r/s.
All of this points to one thing – Surna anticipates a huge year of growth, and they will want to uplist to a major exchange (NASDAQ) because of this. It is clear Surna has a lot going on behind the scenes, and they want to use this momentum to execute on their vision of being a widely held, actively traded public company on a major exchange and in the hands of major institutions. It also points to them not wanting to be the target of a takeover until then.
They have until Dec. 31st, 2021 to execute on all of these things, so their plan is to uplist before the end of 2021, or shortly after Dec. 31st, beginning of 2022. Assuming their progress will be shared and cause share price appreciation, this increase in share price will reduce the ratio of the r/s, which is good for us. With all the catalysts in the near term for the industry (SAFE, full federal legalization), I see their share price going parabolic. For example, if they move up to $0.50/share, then I see the reverse split ratio only being between 4 and 10. The higher the stock price, the lower the ratio, assuming $2.5 - $5 post split is the goal.
If anyone has an argument against my interpretation I would like to hear it. Seriously.
