From an 8-K: "On October 16, 2014, Surna Inc. (the “Company”) closed its private placement of convertible promissory notes (the “Notes”). The Company issued Notes to investors in the aggregate principle amount of $1,324,283 ... convertible at any time at the option of the investor into shares of the Company’s common stock ... at eighty percent (80%) of the prior thirty day weighted average market price for the Company’s common stock.
The Note holders are restricted to converting only ten percent of their position into common stock per month, for the initial six months following maturity."
The word "following" may be an error, for if it weren't, then the restriction would be quite ambiguous and, in fact, may operate to never allow conversion.
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These note investors have a clear reason to want the stock price to trade as low as possible. At $.01 per share, they could convert their shares into roughly 10% of the company -- all for $1.3m. However, because of what appears to be this disclosure error, if any of these notes have been converted, with the common stock subsequently sold, then the company may have granted a free put option to any investor who relied upon their public filing which said that conversion was restricted for the "first six months following maturity."
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