Surety Capital Corp. (OTC PINK: SRYP) announced on July 22, 2016 its Board of Directors, shareholders and FINRA had approved a plan whereby substantially all of its stockholders would be eliminated through a reverse split of 1 for 1,500,000 of the currently outstanding 16,320,973 shares. Cash will be paid in lieu of issuance of fractional shares and will be based on a pre-split per share value of $0.011558. No payment of fractional shares amounting to less than $5.00 will be made.
Surety's Chairman of the Board and CEO Ralph Mendoza stated, "Your Board of Directors for almost 7 years has attempted to create shareholder value to little avail. Despite our efforts and a history of positive earning, we trade infrequently as a 'penny stock.' Following a decision in 2014 to conserve cash and increase earnings by ceasing to incur the costs to continue to file public reports with the OTC Markets, OTCPink placed a "STOP" symbol on the company's market listing page with warnings that included 'No Information,' 'Common Stock Dark or Defunct,' and 'Warning! This Company may not be making material information available.' After consultation with an investment counselor, income tax attorneys and other professionals, it was determined that a number of factors limited the value of the company to essentially 'liquidation value.' Some of the principal factors included very small revenues, operating in a niche market, lack of an independent third party source of capital, dependence on key employees, limited potential for growth, lack of audited financial statements, and shareholder control concentrated in Richard Abrams and his affiliates. While the company has a significant net operating loss carry forward for income tax purposes, the NOL has little third party value since it cannot be sold or used due to Internal Revenue Code restrictions. Further, the 'public corporate shell' has very little third party value since it is a SEC non-reporting company since 2006."
After considering how best to transfer to its shareholders what value the company does have, the directors proposed the plan for the reverse split and paying cash in lieu of issuing fractional shares. The cash amount is based on an adjusted liquidating book value at June 30, 2016 of $188,644. No cash payment for a fractional share that is less than $5.00 will be made.
After the reverse split the only shareholder at the end of the day will be Richard Abrams and his related entities, who own almost 51% of Surety Capital Corporation either directly or indirectly.