You're nearly correct on your scenario. The flaw in your logic is that when they do a 3:1 reverse split, call it 342 million down to 114 million outstanding, and they have 600 million authorized. They now have almost 500 million to do what they want and dilute the 114 million by up to 5 times at some point. This is what we're all really concerned.

Reducing the authorized shares to 200 million (3:1 reduction), still gives them 86 million shares for financing at $3 per share or higher. That's more than $250 million for financing, employee stock options, etc.