A quick review of business history will reveal that most industry sectors initially endured a “learning curve” in their early stages. During the phase of a new industry’s development, competition and technology had the effect of improving and changing the best practices used by business in an attempt to acquire a competitive advantage and capitalize on the new industry. The cannabis industry is currently in this phase, and Surna Inc (OTCMKTS:SRNA) is well positioned to capitalize on the demand for technology that will make the production of cannabis products as efficient as possible, giving businesses an advantage.First, some background on the Company, Surna Inc is based in Boulder, Colorado and develops innovative technologies and products that monitor, control and/or address the energy and resource intensive nature of indoor cannabis cultivation enabling companies to both improve product quality and yield while significantly reducing energy and other resource consumption. The company’s principal revenue stream is based on its main product offerings – supplying industrial technology and products to commercial indoor cannabis grow facilities.The Columbia Journal of Environmental Law says in a July 7, 2015 article that cannabis indoor growing operations consume six times as much energy as the pharmaceuticals industry, and requires eight times as much energy per square foot as the average U.S. commercial building. Also, According to a July 1, 2015 article in The Denver Post, between 2012 and 2014 the electricity used at indoor cultivation facilities in Denver more than doubled from 86 million to 200 million kilowatts. As part of their marketing strategy to increase the exposure of the Company’s innovative products and cultivation technology, Surna’s co-founder and director, Brandy Keen made a presentation on best practices in indoor crop cultivation at the Indoor Ag-Con held in Las Vegas on May 4. Ms. Keen's presentation addressed six top best practices that growers can immediately implement to make their operations more efficient, and have an impact on their bottom lines without sacrificing yield or product quality.
"Looking at the surge in energy use in Denver, we have to learn how to make indoor grows sustainable while still yielding a great crop," Keen said. "Solving the problem of energy conservation without compromising crop yields is an issue that affects all indoor cultivation facilitates, regardless of the crop that is being grown," Keen said.
On May 16, 2017, Surna Inc announced its operating and financial results for the three months ended March 31, 2017. The Company reported revenues of approximately $1,593,000. This represents a decline of 37% from the same period last year. The Company attributes this decline in revenues to the restructuring of its policies to secure sales contracts at an earlier stage which was not in place in Q1 2016, and the heightened uncertainty of the cannabis industry in light of the Trump administration’s ambiguous policy stance on cannabis. Cost of revenue did decrease by 17%, however, operating expenses increased by 41% resulting in a realized net loss of approximately $1,001,000 for three months ended March 31, 2017, an increased in loss of 34% from the same period last year.Some good news reported on the financial results indicated a sales contract backlog. As of March 31, 2017, the Company had executed project sales contracts with a total unearned contract value of approximately $3,790,000 ("Q1 2017 backlog"), of which approximately $2,279,000 was attributed to sales contracts entered into in the three months ended March 31, 2017 and the remaining $1,511,000 attributed to prior quarters.About 78% of the Q1 2017 backlog is attributed to projects for which Surna has not received a further deposit on the Company’s proprietary equipment and, as a result, there are potential risks of project cancellation or delays. Further, a substantial portion of the Company’s Q1 2017 backlog is not expected to be recognized as revenue until the second half of 2017. The balance sheet does show an improvement from the year prior, however, the Company reports that it will require additional capital to be raised in the second half of 2017 to continue to execute its plan on schedule. For 2017, the Company is focused on new facility construction in California, where recreational cannabis use was approved in November 2016, and in Canada, where federal legalization legislation is pending.On March 14, 2017, Surna Inc. appointed Wall Street veteran Timothy J. Keating, as the Chairman of its Board of Directors. Keating brings more than 31 years of Wall Street experience, including 17 years as the principal owner of Keating Investments, LLC, to the Surna team.
SRNA stock has been trading downward since early last April, and is currently at the lower end of the range for 2017 at $.1150. Current market capitalization stands at $22.89 million, on 200.82 million shares outstanding as of May 18, 2017.One factor that should not be overlooked is that Surna Inc is aggressively marketing their products in Canada, where legalization of recreational cannabis is expected to take effect in July of this year. Overall, Surna remains a market leader and well-positioned to capitalize on the industry's growth. We will be updating our subscribers as soon as we know more. For the latest updates on SRNA, sign up below!Disclosure: We have no position in SRNA and have not been compensated for this article.
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