Surna Reports Second Quarter 2021 Results

Net Revenue Increases by 168% Year-over-Year & Adjusted Net Income Increases 174% Year-over-Year Driven by Continued Execution of Organic Growth Strategy

Boulder, Colorado, Aug. 10, 2021 (GLOBE NEWSWIRE) — Surna Inc. (OTCQB: SRNA), operating as Surna Cultivation Technologies, announced today operating and financial results for the three months and year to date ended June 30, 2021.

We will be hosting an investor conference call to discuss our second quarter 2021 financial results and to provide updates on our recent business developments and progress on our strategic growth plan. The call will be held on Tuesday, August 17, 2021, at 4:00 p.m. Eastern Time.

To access the investor call via telephone:
Dial-In Number: 1-973-528-0008
Access Code: 647802

To access the investor call via the Internet:
Webcast URL: https://www.webcaster4.com/Webcast/Page/2020/42061

Interested parties, with contact information supplied, may submit questions to the Company prior to the call to investor@surna.com. These questions, along with all live questions, will be answered in the time available. For those unable to participate in the investor conference call at that time, a replay will be available on the investor relations section of our website at https://surna.com/investor-relations/ beginning on August 18, 2021, at 4:00 p.m. Eastern Time (and will remain available until August 30, 2021).

Three Months Ended June 30, 2021 Financial Results:

  • Total revenue for the three months ended June 30, 2021 was $4.5 million compared to $1.7 million for the same period last year, or a 168% year over year increase.
  • Total gross profit for the three months ended June 30, 2021 was $1.3 million compared to $0.3 million for the same period last year, or a 367% year over year increase.
  • Operating income (loss) for the three months ended June 30, 2021 was $0.1 million compared to $(0.6) million for the same period last year or a 119% year over year increase.
  • Adjusted net income (loss)1 for the three months ended June 30, 2021 was $0.4 million compared to $(0.5) million for the same period last year, or a 174% year over year increase.

[1] Adjusted net income (loss), a Non-GAAP metric, is defined as GAAP net income (loss), after adjustment for non-cash equity compensation expense, other non-cash equity expense, and depreciation expense. The Company considers this a key financial metric as we focus on achieving breakeven or better operating cash flow. For the three months ended June 30, 2021 and 2020, adjusted net income is calculated as follows:

Calculation of Adjusted Net Income at June 30:              
(in thousands of US Dollars)                        
For the three months ended June 30:                        
              2021               2020  
GAAP Net Income (Loss):           $ 265             $ (614 )
                                 
Non-Cash Add Backs:                                
Stock Based Compensation     71               107          
Depreciation & Amortization     17               29          
Total Non-Cash Add-Backs:             88               136  
                                 
Adjusted Net Income (Loss):           $ 353             $ (478 )

Six Months Ended June 30, 2021 Financial Results:

  • Total revenue for the six months ended June 30, 2021 was $6.9 million compared to $3.5 million for the same period last year, or a 97% year over year increase.
  • Total gross profit for the six months ended June 30, 2021 was $1.6 million compared to $0.7 million for the same period last year, or a 123% year over year increase.
  • Operating loss for the six months ended June 30, 2021 was $0.6 million compared to $1.6 million for the same period last year, or a 63% year over year decrease.
  • Adjusted net loss2 for the six months ended June 30, 2021 was $0.3 million compared to $1.2 million for the same period last year, or a 75% year over year decrease.
  • As of June 30, 2021, our cash and cash equivalents were $1.6 million compared to $2.3 million as of December 31, 2020. We used $1.1 million in cash for our operating activities during the six months ended June 30, 2021. Our working capital deficit was $2.1 million as of June 30, 2021, compared to $2.2 million as of December 31, 2020.

[2] Adjusted net income (loss), a Non-GAAP metric, is defined as GAAP net income (loss), after adjustment for non-cash equity compensation expense, other non-cash equity expense, and depreciation expense. The Company considers this a key financial metric as we focus on achieving breakeven or better operating cash flow. For the six months ended June 30, 2021 and 2020, adjusted net income is calculated as follows:

Calculation of Adjusted Net Income at June 30:            
(in thousands of US Dollars)                        
For the six months ended June 30, 2021:                        
              2021               2020  
GAAP Net Income (Loss):           $ (528 )           $ (1,552 )
                                 
Non-Cash Add Backs:                                
Stock Based Compensation     198               298          
Depreciation & Amortization     33               58          
Total Non-Cash Add-Backs:             231               356  
                                 
Adjusted Net Income (Loss):           $ (297 )           $ (1,196 )

Recent Sales Contract and Backlog Information; Production and Vendor Delays

During the second quarter of 2021 we had net bookings totaling approximately $1 million. Our backlog reduced to $8 million. Despite strong revenue in the second quarter, we continue to be affected by production and shipping delays from certain suppliers. COVID-19 is disrupting shipping around the U.S. and globally. Shipping companies are operating with reduced personnel, and there are strict screening actions in U.S. ports causing a backup of imported parts deliveries.

    For the quarter ended  
    June 30, 2020     September 30, 2020     December 31, 2020     March 31, 2021     June 30, 2021  
Backlog, beginning balance   $ 8,875,000     $ 5,592,000     $ 8,198,000     $ 8,448,000     $ 11,578,000  
Net bookings, current period   $ (1,601,000 )   $ 4,241,000     $ 3,637,000     $ 5,497,000     $ 919,000  
Recognized revenue, current period   $ 1,682,000     $ 1,635,000     $ 3,387,000     $ 2,367,000     $ 4,510,000  
Backlog, ending balance   $ 5,592,000     $ 8,198,000     $ 8,448,000     $ 11,578,000     $ 7,987,000  

Organic Growth Strategy Update

As we noted in our press release of May 4, 2021, we have updated our organic growth strategy to include addressing new markets, adding new products and services, and adopting a new trade name, Surna Cultivation Technologies. In the second quarter, we continued executing against this strategy with the addition of our EnviroPro air handler line and the introduction of our architectural design services in early Q3. We encourage readers to see the MD&A section of our Form 10-Q dated and filed today, for further explanation of this and our corporate strategy.

Tony McDonald, Chairman & CEO, commented: “In the second quarter we saw the second-best quarter in our history for revenue and adjusted net income. Unfortunately, our backlog reduced with lower than anticipated bookings due to several projects’ projected closing dates pushing into the second half of 2021. However, our future project pipeline is robust with our increased product offerings and we believe that the sales momentum that has been building over the last four quarters will accelerate as we continue to execute our growth strategy.”

Pandemic Impact and Recovery

In our response to the COVID-19 pandemic and the government and business pandemic measures, the Company took and continues to take measures to adjust its operations as necessary. In early 2020 the Company reduced expenses in light of decreased orders and preserved cash, many of which actions were reversed by the end of the year when orders picked up and the overall business climate improved. Because the pandemic continues in different parts of the world, and it and its effects are still affecting business in different ways in the United States, the Company continues to actively monitor its operations and sales efforts and will make adjustments to its operations as necessary.

About Surna Inc.

Surna Inc. (www.surna.com), operating as Surna Cultivation Technologies, is an industry leader in controlled environment agriculture (CEA) facility design and technologies. We provide full-service licensed architectural and mechanical, electrical, and plumbing (MEP) engineering services, carefully curated HVACD equipment, and proprietary controls systems. Our team of project managers, licensed professional architects and engineers, technology and horticulture specialists and systems integrations experts help our customers by precisely designing for their unique applications. Through our partnership with a certified service contractor network we provide installation and maintenance services to assist in a smooth build-out and optimal facility performance. We have been providing solutions to indoor growers for over 15 years and have served over 800 cultivators with over 200 of them being large, commercial projects.

Headquartered in Boulder, Colorado, we leverage our experience in this space to bring value-added solutions to our customers that help improve their overall crop quality and yield, optimize energy and water efficiency, and satisfy evolving state and local codes, permitting and regulatory requirements.

Forward Looking Statements

This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect our current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release, including the factors set forth in “Risk Factors” set forth in our annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”), and subsequent filings with the SEC. Please refer to our SEC filings for a more detailed discussion of the risks and uncertainties associated with our business, including but not limited to the risks and uncertainties associated with our business prospects and the prospects of our existing and prospective customers; the inherent uncertainty of product development; regulatory, legislative and judicial developments, especially those related to changes in, and the enforcement of, cannabis laws; increasing competitive pressures in our industry; and relationships with our customers and suppliers. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. The reference to Surna’s website has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release.

Non-GAAP Financial Measures

To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings and backlog, as well as other significant non-cash expenses such as stock-based compensation and depreciation expenses. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

  Surna Marketing
  Jamie English
  Vice President, Marketing Communications
  jamie.english@surna.com
  (303) 993-5271

Surna Inc.
Condensed Consolidated Balance Sheets
(in US Dollars except share numbers)

    June 30,     December 31,  
    2021     2020  
      (Unaudited)          
ASSETS                
Current Assets                
Cash and cash equivalents   $ 1,643,463     $ 2,284,881  
Accounts receivable (net of allowance for doubtful accounts of $188,311 and $165,098, respectively)     234,450       33,480  
Inventory, net     444,352       327,109  
Prepaid expenses and other     1,986,977       1,037,823  
Total Current Assets     4,309,242       3,683,293  
Noncurrent Assets                
Property and equipment, net     116,615       147,732  
Goodwill     631,064       631,064  
Intangible assets, net     6,937       7,227  
Deposits     16,122        
Operating lease right-of-use asset     245,037       343,950  
Total Noncurrent Assets     1,015,775       1,129,973  
                 
TOTAL ASSETS   $ 5,325,017     $ 4,813,266  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
                 
CURRENT LIABILITIES                
Accounts payable and accrued liabilities   $ 1,909,544     $ 1,784,961  
Deferred revenue     4,055,774       3,724,189  
Accrued equity compensation     108,945       128,434  
Other liabilities     37,078        
Current portion of operating lease liability     261,187       266,105  
Total Current Liabilities     6,372,528       5,903,689  
                 
NONCURRENT LIABILITIES                
Note payable and accrued interest     516,172        
Other liabilities     37,078       74,156  
Operating lease liability, net of current portion     43,881       169,119  
Total Noncurrent Liabilities     597,131       243,275  
                 
TOTAL LIABILITIES     6,969,659       6,146,964  
                 
SHAREHOLDERS’ DEFICIT                
Preferred stock, $0.00001 par value; 150,000,000 shares authorized; 42,030,331 shares issued and outstanding     420       420  
Common stock, $0.00001 par value; 350,000,000 shares authorized; 237,526,638 and 236,526,638 shares issued and outstanding, respectively     2,376       2,366  
Additional paid in capital     26,324,331       26,107,159  
Accumulated deficit     (27,971,769 )     (27,443,643 )
Total Shareholders’ Deficit     (1,644,642 )     (1,333,698 )
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT   $ 5,325,017     $ 4,813,266  

Surna Inc.
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)
(Unaudited)

    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2021     2020     2021     2020  
Revenue, net   $ 4,509,505     $ 1,682,424     $ 6,876,034     $ 3,492,349  
                                 
Cost of revenue     3,227,181       1,407,599       5,249,104       2,761,000  
                                 
Gross profit     1,282,324       274,825       1,626,930       731,349  
                                 
Operating expenses:                                
Advertising and marketing expenses     168,042       95,053       345,187       243,974  
Product development costs     111,546       74,848       224,184       219,796  
Selling, general and administrative expenses     886,758       710,536       1,627,231       1,819,529  
Total operating expenses     1,166,346       880,437       2,196,602       2,283,299  
                                 
Operating income/(loss)     115,978       (605,612 )     (569,672 )     (1,551,950 )
                                 
Other income (expense):                                
Other income (expense), net     150,518       1,077       43,518       15,397  
Interest expense     (1,254 )     (8,982 )     (1,972 )     (15,277 )
Total other income (expense)     149,264       (7,905 )     41,546       120  
                                 
Income/(loss) before provision for income taxes     265,242       (613,517 )     (528,126 )     (1,551,830 )
                                 
Income taxes                        
                                 
Net income/(loss)   $ 265,242     $ (613,517 )   $ (528,126 )   $ (1,551,830 )
                                 
Income/(loss) per common share – basic   $ 0.00     $ (0.00 )   $ (0.00 )   $ (0.01 )
                                 
Income/(loss) per common share – diluted   $ 0.00     $ (0.00 )   $ (0.00 )   $ (0.01 )
                                 
Weighted average number of common shares outstanding, basic     237,449,715       236,526,638       236,990,726       233,794,550  
                                 
Weighted average number of common shares outstanding, diluted     240,828,867       236,526,638       236,990,726       233,794,550  

Surna Inc.
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)
(Unaudited)

    For the Six Months Ended June 30,  
    2021     2020  
Cash Flows From Operating Activities:                
Net loss   $ (528,126 )   $ (1,551,830 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Depreciation and intangible asset amortization expense     37,180       60,987  
Share-based compensation     21,748       731,797  
Common stock issued for other expense     67,000        
Provision for doubtful accounts     23,213       3,150  
Provision for excess and obsolete inventory     (10,945 )     191,446  
Loss on disposal of assets     8,042       4,124  
Amortization of ROU asset     98,913       93,996  
                 
Changes in operating assets and liabilities:                
Accounts receivable     (224,183 )     51,886  
Inventory     (106,299 )     235,197  
Prepaid expenses and other     (949,152 )     72,811  
Accounts payable and accrued liabilities     124,583       (90,178 )
Deferred revenue     331,585       (576,483 )
Accrued interest     1,972       1,047  
Other liabilities           20,241  
Lease deposit     (16,122 )     51,000  
Operating lease liability, net     (130,156 )     (106,363 )
Accrued equity compensation     108,945       (433,566 )
Net cash used in operating activities     (1,141,802 )     (1,240,739 )
                 
Cash Flows From Investing Activities                
Purchases of property and equipment     (15,316 )      
Proceeds from the sale of property equipment     1,500        
Net cash used in investing activities     (13,816 )      
                 
Cash Flows From Financing Activities                
Proceeds from issuance of note payable     514,200       554,000  
Net cash provided by financing activities     514,200       554,000  
                 
Net change in cash and cash equivalents     (641,418 )     (686,739 )
Cash and cash equivalents, beginning of period     2,284,881       922,177  
Cash and cash equivalents, end of period   $ 1,643,463     $ 235,438  
                 
Supplemental cash flow information:                
Interest paid   $     $  
Income taxes paid   $     $  

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