Surna Inc. Reports Third Quarter 2016 Financial Results
14 November 2016 - 10:08PM
InvestorsHub NewsWire
Surna Inc. Reports Third Quarter 2016 Financial
Results
-
Increased gross margin to 35.6% from 18.7% in Q3
2015
-
Improved operating loss 56% compared to Q3
2015
BOULDER, CO -- November 14, 2016 --
InvestorsHub NewsWire -- Surna Inc. (OTCQB:
SRNA), a technology company that engineers equipment for
controlled environment agriculture (CEA) with special expertise in
cannabis cultivation, reported its financial results for the three
and nine months ended September 30, 2016.
“Last
week, eight states, including California, initiated legalization of
cannabis or expanded their status to include adult recreational
use. This is expected to fuel tremendous growth in the CEA
equipment market as these states come online in the next few
years,” stated Surna’s President and Chief Executive Officer Trent
Doucet. “To prepare for this significant increase in demand, we
have been strengthening our foundation by improving our
infrastructure, customer service policies and project management
procedures. Through more efficient cost management, in the third
quarter of 2016 compared to the same period in 2015, we increased
our gross margin, improved our bottom line and grew our deferred
revenue, even though our revenue decreased primarily due to delays
in customer readiness to acceptance equipment.
“We
are gaining recognition with our energy-efficient solutions coupled
with our expertise in climate conditions necessary for optimal
product yield. As energy is one of the largest cultivation
operating expenses, we believe our technology will provide a
significant competitive advantage as the market continues to grow
dramatically. Additionally, we are in the process of establishing a
regional sales organization and creating recurring revenue streams
via service contracts. To that end, we are developing dynamic,
proactive management systems to optimize energy usage, maximize
equipment reliability, and leverage intelligent equipment that can
be easily automated to reliably cultivate crops. Further, we expect
to leverage our relationship with Surna-only Sterling Pharms to
demonstrate our products and technology. We are very excited about
our progress and the expanding opportunity.”
ISIDEO, a LEEDs certified consultant,
estimated, using a simulation of the current Surna model, the
Hybrid Building may be able to reduce energy by 60% over the course
of a year over traditional cultivation. A scale of the Hybrid Building will be
exhibited in booth 329 at the Marijuana Business Conference
& Expo® in Las Vegas from November 16 to
18.
Results for Third Quarter: 2016 Compared to
2015
- - Revenue was $1.2
million, compared to $3.6 million, primarily due to delays in
customer readiness to acceptance equipment. Surna continues to
expect quarterly sales will fluctuate due primarily to the timing
of state legislation, procedural set up, licensing and general
availability.
- Cost of revenue was $754,000,
compared to $3.1 million, due to lower sales and the more efficient
cost and supply chain management.
- - Gross margin increased to
35.6%, compared to 14.0%.
- Operating expenses decreased to
$654,000, compared to $1.0 million.
- - SG&A and marketing
expenses were reduced to $582,000, compared to $825,000, due to
reduced personnel costs and cost containment.
- Product development costs
decreased to $72,000, compared to $224,000 as the Surna Reflector
and the Hybrid Building transitioned to production.
- Operating loss improved to
$237,000 from $540,000.
- Net loss was $669,000, or $0.00
per share, compared to $1.3 million, or $0.01 per
share.
Balance Sheet
Highlights
Cash
on hand was $235,000 at September 30, 2016, compared to $331,000 at
December 31, 2015. Deferred revenue increased to $1.4 million at
September 30, 2016, from $986,000 at December 31,
2015.
Subsequent to quarter end, on October 31,
Surna began private negotiations with certain holders of certain
10% convertible promissory notes and warrants with a view to
converting the notes and amending the terms of the warrants, which
would reduce outstanding indebtedness and make it more likely that
holders would exercise the warrants. . Surna anticipates
reporting on the results of these negotiations when they are
completed.
Results for First Nine Months: 2016 Compared
to 2015
Revenue was $5.6 million, compared to $6.2
million. Gross margin, which included the impact of the
$455,000 warranty charge in the second quarter, increased to 32.7%,
compared to 13.7%. Net loss was $2.1 million, or $0.02 per share,
compared to $3.7 million, or $0.03 per share.
Conference Call
Management will review
the results on a conference call
today, November 14, 2016, at
9:00 a.m. MT/ 11:00 a.m. ET. To access the conference call, please
dial 855-327-6837, if calling from the United States or Canada, or
631-891-4304, if calling internationally, and use passcode
10001959.
A replay of the call will be
available until November 18, 2016, which can be accessed by dialing
844-512-2921, if calling from the United States or Canada, or
412-317-6671, if calling internationally. Please use passcode
10001959 to access the replay. The call will be webcast and
available at www.surna.com/investor-relations where a
transcript of the call will also be provided shortly after it
concludes.
About
Surna
Surna Inc. (www.surna.com)
develops innovative technologies and products that monitor, control
and or address the energy and resource intensive nature of indoor
cannabis cultivation. Currently, the company’s revenue stream is
based on its main product offerings – supplying industrial
technology and products to commercial indoor cannabis grow
facilities.
Headquartered in Boulder, CO,
Surna’s diverse engineering team is tasked with creating novel
energy and resource efficient solutions, including the company’s
signature water-cooled climate control platform. The company’s
engineers continuously seek to create technology that solves the
highly specific demands of the cannabis industry for temperature,
humidity, light and process control.
Surna’s goal is to provide
intelligent solutions to improve the quality, the control and the
overall yield and efficiency of CEA.
Though its clients do, the company neither produces nor sells
cannabis.
Forward Looking
Statements
This press release contains
forward-looking statements regarding the Company’s future business
expectations, which are subject to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are only predictions and may differ
materially from actual results due to a variety of factors
including Surna’s ability to monetize service components, Surna’s
support of premium prices for existing products, commercialization
of research and development efforts and continued expansion of
legal cannabis markets. Other risks and uncertainties include,
among others, risks related to new products, services, and
technologies, government regulation and taxation, and fraud. In
addition, the current global economic climate amplifies many of
these risks. More information about factors that potentially could
affect Surna’s financial results is included in Surna’s filings
with the Securities and Exchange Commission, including its most
recent Annual Report on Form 10-K and subsequent filings. The
Company cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
The Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Statement About Cannabis
Markets
The
use, possession, cultivation, and distribution of cannabis is
prohibited by federal law. This includes medical and
recreational cannabis. Although certain states have legalized
medical and recreational cannabis, companies and individuals
involved in the sector are still at risk of being prosecuted by
federal authorities. Further, the landscape in the cannabis
industry changes rapidly. What was the law last week is not
the law today and what is the law today may not be the law next
week. This means that at any time the city, county, or state
where cannabis is permitted can change the current laws and/or the
federal government can supersede those laws and take prosecutorial
action. Given the uncertain legal nature of the cannabis industry,
it is imperative that investors understand that the cannabis
industry is a high-risk investment. A change in the current laws or
enforcement policy can negatively affect the status and operation
of our business, require additional fees, stricter operational
guidelines and unanticipated shut-downs.
Surna
Marketing
Jamie English
Marketing Manager
jamie.english@surna.com
303-993-5271
Investor
Relations
Kirsten Chapman/ Becky
Herrick
LHA Investor Relations
surna@lhai.com
(415) 433-3777