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15.05.2018 13:15:00

Surna Reports Q1 2018 Results

Surna Reports Q1 2018 ResultsNet bookings increase by 88% over Q4 2017Founder transition plan announcedRecap of accomplishments in connection with company repositioning and upgradingPR NewswireBOULDER, Colorado, May 15, 2018BOULDER, Colorado, May 15, 2018 /PRNewswire/ -- Surna Inc. (OTCQB: SRNA) announced today operating and financial results for the three months ended March 31, 2018 along with our recently approved transition plan for the company's husband and wife co-founders.  Surna Inc. designs, engineers and manufactures application-specific environmental control and air sanitation systems for commercial, state- and provincial-regulated indoor cannabis cultivation facilities in the U.S. and Canada. Q1 2018 Financial Results During the three months ended March 31, 2018, we had net bookings of $4,623,000, an increase of $2,169,000, or 88%, compared to the three months ended December 31, 2017, and an increase of $1,886,000, or 69%, compared to the three months ended March 31, 2017.  See "Project Life-Cycle and Backlog" below. Our revenue for the three months ended March 31, 2018 was $2,055,000, a decrease of $254,000, or 11%, compared to the three months ended December 31, 2017, and an increase of $462,000, or 29%, compared to the three months ended March 31, 2017.Our ending backlog as of March 31, 2018 was $7,024,000, an increase of $2,568,000, or 58%, compared to our December 31, 2017 backlog, and our largest quarter-end backlog.Gross profit margin decreased by eight percentage points from 27% for the three months ended March 31, 2017 to 19% for the three months ended March 31, 2018.We realized a net loss of $1,884,000 for the three months ended March 31, 2018 as compared to a net loss of $1,001,000 for the three months ended March 31, 2017, an increase of $883,000, or 88%. The net loss for the three months ended March 31, 2018 included $641,000 of non-cash, stock-based compensation expenses and $21,000 of non-cash gain related to debt instruments.  Chris Bechtel, the Company's CEO stated:  "We are encouraged to see that our investments in upgrading our engineering personnel and increasing the effectiveness of our sales and marketing outreach over the last two quarters are beginning to be realized through increased net bookings.  While we are not satisfied with our recent declines in gross margin, and which was partly attributable to legacy internal procedures, we remain focused on improvement in this area through a combination of more disciplined pricing using enhanced pricing software, better absorption of fixed costs as we convert our increased bookings into revenue, and the implementation over time of lower-cost supplier alternatives.  We remain confident that with the new people, engineering know-how and improved processes that we now have in place, we are well positioned for expected future growth."   Transition Plan Announced for Our Co-FoundersOn May 10, 2018, Brandy M. Keen, one of our founders, notified the Board of Directors (the "Board") of her resignation as our Vice President and Secretary and as a member of the Board effective May 10, 2018.  Ms. Keen will continue as a Senior Technical Advisor through April 30, 2020.  Beginning May 1, 2019, Ms. Keen will become a part-time employee, will be able to relocate her personal residence outside Colorado, and will attend significant trade shows, major customer meetings, and meetings at the Boulder office from time to time.  The Board has agreed to grant Ms. Keen a total of 4,800,000 restricted stock units ("RSUs"), which will vest at various dates through April 30, 2020.  Stephen Keen, our other founder and the spouse of Ms. Keen, also agreed to terminate his consulting agreement with the Company effective May 31, 2018.  Mr. Keen will remain subject to the restrictive covenants regarding his post-termination activities for the one-year period following termination.  However, the Company is allowing Mr. Keen to participate in a specific hybrid cultivation facility project with a third party.  As part of this transition plan, the Company has agreed to purchase shares of common stock held by the Keens at an aggregate purchase price of $400,000.  The repurchase of any shares of common stock by the Company is subject to the closing of a private financing of not less than $1,500,000.  The price for the shares of common stock being repurchased by the Company will be equal to 80% of the price paid by investors in the private financing.  There is no assurance that the Company will be able to complete a private financing. The Company will also cooperate in the implementation of a Section 10b-5 common stock sales plan commencing on or about January 1, 2019, to allow the Keens to sell shares of common stock owned by them in open market transactions.  The plan will allow the Keens to sell shares of the Company's common stock in monthly intervals and in an amount not to exceed 200,000 shares per month.  In addition, the Company and the Keens have agreed to enter into an option to purchase agreement under which the Company will have the right, but not the obligation, to acquire all of the 35,189,669 shares of preferred stock owned by the Keens.  There are a total of 77,220,000 shares of preferred stock outstanding, owned by a total of six individuals including the Keens.  The option will expire on April 30, 2020.  Upon exercise of the option, the Company will issue one share of common stock for each 1,000 shares of preferred stock purchased by the Company.  The common stock issued upon exercise will be restricted shares.  As consideration for the Keens' grant of the option, the Company will pay them $5,000.Brandy Keen stated:  "I'm very proud of the work we have done at Surna, and it's my confidence in this leadership team that allows me to now shift my entire focus to business development and sales, where I can be most effective.  This is a natural transition and evolution of the Company's maturation process, and it's important to us as founders that we manage it in a way that seeks to maximize value to our customers, our employees and our shareholders.  I'm excited that we've developed a plan that does all of those things, and look forward to helping the Company grow its revenue over the next two years."Chris Bechtel stated:  "The Keens have been instrumental in growing Surna to where it is today, and we thank them for their past efforts and commitment to facilitate an orderly transition of our executive management from the founders to a professional management team.  We are also excited that Brandy will be able to focus her efforts on sales and business development activities, where she can provide the highest value to the Company as it continues to pursue its growth plan.  This is another step in the evolution of Surna, which coupled with a number of accomplishments over the last year, positions us for future growth and a professionally managed public company."Recap of Accomplishments in Connection with Company Repositioning and UpgradingAbout a year ago, we made a commitment to reposition and undertake a top-to-bottom upgrade of every aspect of the Company's business.  As with any such process, the investment is typically made upfront and the benefits take time to manifest themselves in terms of increased revenue and an improvement in profitability.  In the short-term, profitability worsens, and losses may increase.  We expect that our experience will be similar.  Moreover, after a sales cycle that can last up to 12 months to book a new order, we then have a project life-cycle, where our engineering services and climate control equipment are performed and delivered to our customers, typically over a period of four months to two years.  Thus, we expect that the return on our investment in repositioning and upgrading will be borne out over the next four to 10 quarters.  Some of the Company's notable accomplishments in this regard include the following: Management and PeopleAppointment of a new CEO in August 2017, who had already been a significant investor in the CompanyInstallation of a new management team with key hires in the Company's three most important divisions:  engineering, sales management and project managementRecruitment of an expanded, professional engineering team which now includes five full-time engineersExpansion and upgrading of our sales teamExpanded project management staffing and role to facilitate timely and efficient completion of the project life-cycle Business Development and Growth Shift in focus to commercial-scale projects (orders over $100,000), with 13 commercial-scale facilities already booked in ...Full story available on Benzinga.com
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