EQNX::TICKER_START (Other OTC:SRNA),(OTC US:SRNA), EQNX::TICKER_END
Net Revenue Increased by 127% Year-over-Year & Net Bookings were Second Highest ever, Driven by Continued Execution of Organic Growth Strategy
Surna Inc. (OTCQB: SRNA), operating as Surna Cultivation Technologies, announced today operating and financial results for the three months and year to date ended September 30, 2021.
We will be hosting an investor conference call to discuss our third 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 today, Wednesday, November 10, 2021, at 4:15 p.m. Eastern Time.
To access the investor call via telephone:
Dial-In Number: 1-973-528-0008
Access Code: 408712
Interested parties, with contact information supplied, may submit questions to the Company prior to the call to email@example.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 November 11, 2021, at 4:00 p.m. Eastern Time (and will remain available until November 30, 2021).
Three Months Ended September 30, 2021, Financial Results:
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 September 30, 2021 and 2020, adjusted net income is calculated as follows:
Calculation of Adjusted Net Income at September 30: (in thousands of US Dollars) For the three months ended September 30: 2021 2020 GAAP Net Income (Loss): ($408) ($270) Non-Cash Add Backs: Stock Based Compensation 29 56 Depreciation & Amortization 16 28 Total Non-Cash Add-Backs: 45 84 Adjusted Net Income (Loss): ($363) ($186)
Nine Months Ended September 30, 2021, Financial Results:
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 nine months ended September 30, 2021 and 2020, adjusted net income is calculated as follows:
Calculation of Adjusted Net Income at September 30: (in thousands of US Dollars) For the nine months ended September 30, 2021: 2021 2020 GAAP Net Income (Loss): ($936) ($1,822) Non-Cash Add Backs: Stock Based Compensation 227 354 Depreciation & Amortization 49 86 Total Non-Cash Add-Backs: 276 440 Adjusted Net Income (Loss): ($660) ($1,382)
Recent Sales Contract and Backlog Information; Production and Vendor Delays
During the third quarter of 2021 we had net bookings totaling approximately $5.6 million, which is the second highest in our history. Our backlog increased to $9.9 million, also among the highest in our history. We continued to be effected by production and shipping delays from certain suppliers which negatively effected completion schedules and impacted our revenue in the third quarter. COVID-19 is disrupting shipping around the U.S. and globally, and shipping companies are experiencing delays for a host of reasons. Additionally, delivery delays are being caused by issues relating to domestic truck transportation.
For the quarter ended September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 Backlog, beginning balance $ 5,592,000 $ 8,198,000 $ 8,448,000 $ 11,578,000 $ 7,987,000 Net bookings, current period $ 4,241,000 $ 3,637,000 $ 5,497,000 $ 919,000 $ 5,600,000 Recognized revenue, current period $ 1,635,000 $ 3,387,000 $ 2,367,000 $ 4,510,000 $ 3,706,000 Backlog, ending balance $ 8,198,000 $ 8,448,000 $ 11,578,000 $ 7,987,000 $ 9,881,000
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 third quarter, we continued executing against this strategy with the addition of our EnviroPro air handler line, the introduction of our architectural design services and adding a benching and racking line of products. Also in the third quarter, we signed our first preventative maintenance contracts. In early Q4 2021, we announced the availability of our lighting product via our agreement with BVV. 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 growth strategy.
Tony McDonald, Chairman & CEO, commented: "In the third quarter we saw the second-best quarter in our history for net bookings. Revenue in the quarter continues our year-over-year trend of significant increases. We have seen the continuation of momentum in our commercial pipeline with our increased product offerings and execution against our organic growth strategy."
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, proprietary controls systems, lighting, and benching and racking products. 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 including over 200 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. There can be no assurance that contracts included in backlog will actually generate revenues or when the actual revenues will be generated. Backlog and net bookings should be considered in addition to, rather than as a substitute for, recognized revenue and deferred revenue. We can provide no assurance as to the profitability of our contracts reflected in backlog and net bookings. 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 firstname.lastname@example.org (303) 993-5271
Condensed Consolidated Balance Sheets
(in US Dollars except share numbers)
September 30, December 31, 2021 2020 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 2,283,879 $ 2,284,881 Accounts receivable (net of allowance for doubtful accounts of $186,073 and $165,098, respectively) 32,245 33,480 Inventory, net 480,354 327,109 Prepaid expenses and other 1,157,119 1,037,823 Total Current Assets 3,953,597 3,683,293 Noncurrent Assets Property and equipment, net 98,967 147,732 Goodwill 631,064 631,064 Intangible assets, net 6,792 7,227 Deposits 24,183 - Operating lease right-of-use asset 194,353 343,950 Total Noncurrent Assets 955,359 1,129,973 TOTAL ASSETS $ 4,908,956 $ 4,813,266 LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable and accrued liabilities $ 1,674,088 $ 1,784,961 Deferred revenue 3,059,525 3,724,189 Accrued equity compensation 108,945 128,434 Other liabilities 37,078 - Current portion of operating lease liability 238,140 266,105 Total Current Liabilities 5,117,776 5,903,689 NONCURRENT LIABILITIES Note payable and accrued interest 517,468 - Other liabilities 37,078 74,156 Operating lease liability, net of current portion - 169,119 Total Noncurrent Liabilities 554,546 243,275 TOTAL LIABILITIES 5,672,322 6,146,964 Commitments and Contingencies (Note 7) - - TEMPORARY EQUITY Series B Redeemable Convertible Preferred Stock, $0.00001 par value; 3,300 and 0 issued and outstanding, respectively 3,960,000 - Series B Redeemable Convertible Preferred Stock Subscription Receivable (1,365,000 ) - Series B Redeemable Convertible Preferred Stock Accrued Dividends 1,447 - Total Temporary Equity 2,596,447 - SHAREHOLDERS' DEFICIT Preferred stock; 150,000,000 shares authorized Series A Preferred stock, $0.00001 par value; 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 25,017,065 26,107,159 Accumulated deficit (28,379,674 ) (27,443,643 ) Total Shareholders' Deficit (3,359,813 ) (1,333,698 ) TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 4,908,956 $ 4,813,266
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)
For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Revenue, net $ 3,706,436 $ 1,634,669 $ 10,582,470 $ 5,127,018 Cost of revenue 2,959,264 1,108,758 8,208,368 3,869,758 Gross profit 747,172 525,911 2,374,102 1,257,260 Operating expenses: Advertising and marketing expenses 224,393 89,695 569,580 333,669 Product development costs 98,623 84,433 322,807 304,229 Selling, general and administrative expenses 866,699 634,447 2,493,930 2,453,976 Total operating expenses 1,189,715 808,575 3,386,317 3,091,874 Operating loss (442,543 ) (282,664 ) (1,012,215 ) (1,834,614 ) Other income (expense): Other income (expense), net 35,934 13,621 79,452 $ 29,018 Interest expense (1,296 ) (1,396 ) (3,268 ) $ (16,673 ) Total other income (expense) 34,638 12,225 76,184 12,345 Loss before provision for income taxes (407,905 ) (270,439 ) (936,031 ) (1,822,269 ) Income taxes - - - - Net loss $ (407,905 ) $ (270,439 ) $ (936,031 ) $ (1,822,269 ) Convertible Preferred Series B Stock Redemption Value Adjustment $ (2,262,847 ) $ - $ (2,262,847 ) $ - Convertible Preferred Series B Stock Dividends (1,447 ) - (1,447 ) - Net Loss Available to Common Shareholders $ (2,672,199 ) $ (270,439 ) $ (3,200,325 ) $ (1,822,269 ) Loss per common share - basic and dilutive $ (0.01 ) $ (0.00 ) $ (0.01 ) $ (0.01 ) Weighted average number of common shares outstanding, basic and dilutive 237,526,638 236,526,638 237,171,327 234,711,893
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)
For the Nine Months Ended September 30, 2021 2020 Cash Flows From Operating Activities: Net loss $ (936,031 ) $ (1,822,269 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and intangible asset amortization expense 54,973 90,867 Share-based compensation 51,055 252,757 Common stock issued for other expense 67,000 - Provision for doubtful accounts 20,975 13,150 Provision for excess and obsolete inventory (13,764 ) (5,117 ) Loss on disposal of assets 8,042 4,124 Amortization of ROU asset 149,597 141,871 Changes in operating assets and liabilities: Accounts receivable (19,740 ) 27,950 Inventory (139,481 ) 714,709 Prepaid expenses and other (119,296 ) (488,007 ) Accounts payable and accrued liabilities (110,872 ) (397,181 ) Deferred revenue (664,663 ) 2,044,830 Accrued interest 3,268 - Lease deposit (24,183 ) - Operating lease liability, net (197,085 ) (79,521 ) Accrued equity compensation 108,945 101,472 Net cash (used in)/provided by operating activities (1,761,260 ) 599,635 Cash Flows From Investing Activities Purchases of property and equipment (15,316 ) (3,500 ) Proceeds from the sale of property equipment 1,500 - Net cash used in investing activities (13,816 ) (3,500 ) Cash Flows From Financing Activities Cash proceeds from sale of preferred stock and warrants, net of issuance costs 1,259,874 - Proceeds from issuance of note payable 514,200 554,000 Net cash provided by financing activities 1,774,074 554,000 Net change in cash and cash equivalents (1,002 ) 1,150,135 Cash and cash equivalents, beginning of period 2,284,881 922,177 Cash and cash equivalents, end of period $ 2,283,879 $ 2,072,312 Supplemental cash flow information: Interest paid $ - $ - Income taxes paid $ - $ - Non-cash investing and financing activities: Adjustment of carrying value of series B preferred stock to redemption value $ 2,262,847 Subscription receivable - series B preferred stock $ 1,365,000 $ - Options issued for accrued equity compensation $ 128,434 $ - Accrued dividends $ 1,447 $ -