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Thursday, October 22, 2020

Surna Inc (OTCMKTS:SRNA) Faces Its Moment of Destiny

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Surna Inc (OTCMKTS:SRNA) is a micro-cap name that possibly has an interesting path ahead, depending on how the company executes. Over the recent period, it has suffered from some capital raising pains. But the capital now in play has a chance at a strong ROI given SRNA’s positioning as an equipper of new marijuana cultivators at a time when recent legislative changes are likely to give rise to a tsunami of new cultivators.

But, at present, as noted, the company is working through the impact of its priors: SRNA just reported as of December 6, 2016 it entered into Note Conversion and Warrant Amendment Agreements with 33 holders. Nonetheless, traders will note 7% added to share values of the stock over the past week of action. The situation may be worth watching. SRNA has a track record that includes a number of dramatic bounces.

Surna Inc (OTCMKTS:SRNA) promulgates itself as a company that designs, develops, manufactures, and distributes systems for controlled environment agriculture (CEA). It offers chillers, lights, reflectors, and irrigation systems; Hybrid Building that uses the sun as its primary light source; air sanitation technology for mold and mildew risk mitigation to cultivators; and mechanical, electrical, and plumbing services.

The company serves cannabis cultivation facilities; and other indoor agricultural facilities, including organic herb and vegetable producers. In short, Surna Inc develops innovative technologies and products that monitor, control and 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.

According to company materials, “Surna’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 controlled environment agriculture. Though its clients do, the company neither produces nor sells cannabis.”

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The recent expansion in legal footprint for marijuana is especially important for SRNA over the near term. After all, this company is about systems for managing the cultivation process.

Think of it this way: It’s an equipper of new cultivators at a time when we are likely to see a massive surge in the number of new cannabis cultivators in a space that is exploding with the potential to arm such new players with cash from operations and/or debt to acquire necessary equipment. In other words, there is likely about to be a massive jump in the demand for cannabis cultivation equipment. The race to get the most exposure for those selling such equipment is all important.

In addition, as noted above, this story is going to be all about execution. You can’t dig a moat around what this company does. They will have to be better and bigger, and do so faster. So far, they haven’t put doubts to bed on that note.

At this point, revenues are falling on a y/y basis. But that probably doesn’t matter. The key will be how that number looks in March. We can’t see this one completely under the hood. We can’t do a channel check here. But we are clearly working through a period in this company’s history when the opportunity is there for major growth.

Currently trading at a market capitalization of $21.8M, SRNA has a decent store ($235.46k) of cash on the books, alongside total assets a bit less than $2.4M, which must be weighed relative to an appreciable load ($2.27M) of total accumulated debt. That’s not a good balance sheet situation. And the worry here is an endless road of dilution, with convertibles and convertibles and then the odd reverse split.

Surna Inc is making real money, with trailing 12-month revenues coming in at $7.24M. But the element we need to see growth on that top line. That will, in theory, show off execution at this critical time as well an ability to make that balance sheet completely unimportant. We will update the story again soon as further details emerge. For continuing coverage on shares of $SRNA stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

 

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