Surna Inc (OTCMKTS:SRNA) Posts Strong Results

Surna Inc (OTCMKTS:SRNA) has been quiet for most of this year. Before this month's earning report, the last we heard from the company was back in January. Unlike other marijuana companies, Surna is focused on growing its business rather than putting out press releases to boost its stock. The company is letting its results do the talking. Here, the company is delivering.In 2015, revenue grew 328% to $7.9 million, compared to $1.8 million, reflecting focused investments in sales and marketing, new product introductions, increased engineering services and greater demand for products as the number of state-legal cannabis markets continues to grow. The net loss was $5.3 million, or $0.04 per share, compared to $3.0 million, or $0.03 per share. Cash, accounts receivable, inventory and prepaid assets at December 31, 2015 were $2.1 million. In addition, deferred revenue was $986,000, up from $408,000. Deferred revenue represents contracts that are in progress, as the company does not recognize revenue until the equipment is shipped or services are performed.SRNA has been using its money wisely and investing in research and development. Product development costs were $708,000, compared to $319,000 as Surna increases investments in its hybrid building and lighting technologies. This included the Surna Reflector, which is Surna’s first product to combine lighting and environmental control into one unit while increasing light delivery to the plant canopy.Surna also benefits in that it does not produce or sell cannabis. This allows the company to avoid the hassles of banking, security and possible adverse Federal regulations. We like that SRNA is a pick and shovel type of company rather than an actual grower or producer of cannabis. In the late 1800s gold rush, it was the pick and shovel companies that served the gold miners that made all the money while many gold miners went bust. SRNA’s business model centers around developing 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.We see Surna as being well-positioned for 2016. Roughly 14 states could legalize marijuana this year, adult-use cannabis or possibly both, either at the ballot box or through state legislatures. While it’s doubtful all those states will be successful, there’s a good chance at least a handful will legalize in 2016. No other single year has offered such incredible promise in terms of the sheer volume of states that could legalize, thanks to other pioneering marijuana markets and growing support for cannabis in general.The ArcView Group just reported that legal sales of cannabis grew to $5.4 billion in 2015, up from $4.6 billion in 2014. Demand is expected to remain strong this year and the research firm forecasts sales of $6.7 billion. Nonmedicinal adult use accounted for $998 million of the total sales in 2015, up from $351 million in 2014, according to the ArcView/New Frontier report summary.In January, Surna signed an agreement with Las Vegas cultivator Cloud 9 Wholesale. Under the terms of the agreement, Surna will provide their proprietary climate control technology to the cultivation facility for the single-phase project. The Cloud 9 Wholesale facility covers 30,000 square feet, which will require approximately 550 tons of cooling equipment for cultivation climate control. Nevada is one of 23 states that currently permit medical marijuana cultivation and consumption. In November, Nevada will vote on expanding the law to include recreational cannabis cultivation and consumption.Currently trading with a market cap of $10 million, we see Surna as one of the most undervalued pot stocks trading on the OTC markets. Shares remain well off their 52 week highs of $.29 per share. As more pot stock investors look for undervalued and underfollowed pot stocks, SRNA will be at the top of their radar screens. We will be updating Insider Financial as soon as we know more. For continuing coverage on SRNA, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in SRNA and have not been compensated for this article.