Announces $15.2 Million in 2019 Revenue and Downsizing of Operations in Response to Coronavirus
Boulder, Colorado, March 24, 2020 (GLOBE NEWSWIRE) — Surna Inc. (OTCQB: SRNA) announced today operating and financial results for the three and 12 months ended December 31, 2019.
Due to the unprecedented circumstances surrounding the COVID-19 virus and the uncertainty of its impact on the Company’s operations, the Company has decided to cancel its Q4 2019 investor conference call previously scheduled for March 26, 2020.
- Our 2019 revenue was $15.2 million, which represents a 59% increase compared to 2018 revenue and our largest ever annual revenue. Our 2019 revenue includes $6.7 million recognized from three project contracts we signed with a single multi-facility operator (“MFO”), which we define as businesses that own and operate two or more cannabis cultivation facilities in either the U.S. or Canada.
- For 2019, our operating loss and net loss was $1,311,000 and $1,339,000, respectively. This compares to a 2018 operating loss and net loss of $4,820,000 and $4,744,000, respectively.
- Our 2019 adjusted net income1 was $92,000, compared to a 2018 adjusted net loss of $2,592,000. This year we achieved our first ever annual adjusted net income, a key milestone that we established in early 2019.
- Our Q4 2019 revenue was $3,719,000, compared to Q4 2018 revenue of $2,195,000, an increase of 69%. Our Q4 2019 net loss was $800,000, compared to a Q4 2018 net loss of $816,000. Our Q4 2019 adjusted net loss was $154,000, compared to a Q4 2018 adjusted net loss of $811,000.
- Our 2019 gross profit margin was 29.9% compared to 25.6% for 2018, an increase of 4.3 percentage points.
- As of December 31, 2019, our cash was $922,000, compared to cash of $253,000 as of December 31, 2018. We generated $672,000 in cash flow from our operating activities during 2019. Our working capital deficit was $1,437,000 as of December 31, 2019, compared to a working capital deficit of $1,031,00 as of December 31, 2018. However, our year-end working capital deficit includes $503,000 of accrued compensation expense that was paid in stock options in Q1 2020. Excluding the accrued compensation expense, the 2019 year-end working capital deficit was $934,000
1 “Adjusted net income (loss)” means our GAAP net income (loss), after adjustment for non-cash equity compensation expense, debt-related items and depreciation expense.
Downsizing of Operations
A number of recent events have had an adverse impact on our operations and financial condition, including constraints on capital availability for our customers and prospects who have commenced, or are contemplating, new and expanded cannabis cultivation facilities and the recent outbreak of COVID-19, a novel strain of coronavirus, which has spread across the globe including the U.S. Most recently, the response to this coronavirus by federal, state and local governments in the U.S. has resulted in significant market and business disruptions across many industries and affecting businesses of all sizes. This pandemic has also further tightened capital access for most businesses.
As a result of these events, we assessed our near-term operations, working capital, finances and capital formation opportunities, and implemented, in late March 2020, a downsizing of our operations, including workforce reductions, reductions of salaried employee compensation and a reduction of hours worked to preserve cash resources, cut costs and focus our operations on customer-centric sales and project management activities. The extent to which COVID-19 will impact our business and financial results will depend on future developments, which are uncertain and cannot be predicted at this time.
The duration and likelihood of success of this downsizing effort, workforce reduction and cost-cutting measures are uncertain. If these actions do not meet our expectations, or additional capital is not available, we may not be able to continue our operations. In addition, any potential government mandate to limit non-essential work would have a material adverse effect on management’s revised plans. If our customers or prospects are unable to continue operations or obtain project financing and we are unable to increase revenues, or otherwise generate cash flows from operations, we will not be able to successfully execute on the various strategies and initiatives to grow our business.