Surna eyes Nasdaq listing after profitable quarter

BOULDER — After posting its first profitable quarter earlier this month, Surna Inc. (OTC: SRNA), a manufacturer of environmental-control and air-sanitation systems for indoor cannabis-cultivation, does not appear content to rest on its laurels.

The company announced Tuesday during a call with analysts and investors plans to explore the possibility of listing Surna’s stock on the Nasdaq exchange.

“The old Surna was silent, unengaged and abandoned [by the investment community] — justifiably so,” Surna chairman Tim Keating said. “But our goal by the end of 2020 is to create a widely held, actively traded and fully valued company as a stepping stone to an eventual Nasdaq listing.”

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The company is planning a series of meetings with institutional investors over the next several months to explore its options.

“We continue to believe we are undervalued comparable peer group,” Keating said. “… We have no debt, and the [capitalization] table is pristine.”

According to Surna, peer companies in the OTC ancillary cannabis space include Generation Alpha Inc. (OTC: GNAL), Growlife Inc. (OTC: PHOTO) and General Cannabis Corp. (OTC: GROWG).

“We’ve achieved profitability for the first time, which is an especially notable achievement in this industry,” Keating said. The company posted record revenues of $4.2 million in the second quarter of fiscal year 2019

Despite the positive momentum, Surna leaders acknowledge that the company must continue to grow. They’ve set annual revenue targets of $20 million to $40 million.

In order to reach that goal, Surna must not only boost its organic revenue growth, but also acquire additional companies.

By increasing its breadth of products and services, Surna “hopes to create a one-stop shopping solution for indoor cannabis growers’ equipment and supply needs,” Keating said.

“If we successfully execute our organic growth plan and our strategic acquisition-associated capital raise initiatives, our goal is to become one of the first profitable ancillary businesses serving the cannabis industry to obtain a Nasdaq listing.”

Existing cannabis-related companies traded on the exchange include Akerna Corp. (Nasdaq: KERN), Cronos Group Inc. (Nasdaq: CRON) and Arena Pharmaceuticals (Nasdaq: ARNA).

Surna’s organic growth strategy includes leveraging an expanded product line to attract more multi-facility operators, expansion and retrofit projects, Surna CEO Tony McDonald said. This would help the firm “generate more predictable and accelerated revenue stream” by reducing reliance on more risky new-build operations.

Surna has identified 45 domestic multi-facility cannabis cultivators, or MFOs, that operate more than 250 facilities, he said. Tapping into that market is a more efficient use of resources than focusing on single-facility owners who want to build their first cultivation project.

“Our future success will be dependent on our ability to expand our business with other MFOs,” McDonald said. “… Many of those MFOs have immediate or near-term plans to expand their cultivation facilities.”