Economic conditions threaten Surna’s viability

BOULDER — Surna Inc. (OTCQB: SRNA), a Boulder-based manufacturer of growhouse equipment for the cannabis industry, has concerns about its long-term viability in the face of the ongoing COVID-19 pandemic and the nationwide economic downturn, the company reported this month in a regulatory disclosure.

Despite growing revenue in the first quarter of fiscal year 2020 — $1.81 million compared with $1.77 million in the same period in 2019 — Surna has struggled to turn a profit and downsized its operations in March. 

The firm laid off and furloughed an unspecified number of workers and cut salaries and hours for others. Some employees were brought back in April after the company received a $554,000 loan. But in June, additional furloughs were implemented, and salaries were reduced across the firm.

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“The duration and likelihood of success of this downsizing effort, workforce reduction and cost-cutting measures are uncertain,” according to the U.S. Securities and Exchange Commission filing. 

“The general economic conditions, government mandates about permitted work and working environments, and working capital constraints, all of which affect both our customers and us and our downsizing may have an adverse effect on our ability to effectively market our services, generate new customer orders, and contract implementation,” the disclosure said. “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 our various strategies and initiatives to grow our business. If these actions do not meet our expectations, or additional near-term capital is not available, we may not be able to continue our operations.”

In a statement, Surna CEO Tony McDonald praised the firm’s first-quarter revenue performance, but said, “future bookings have slowed considerably in the current economic crisis. Fortunately, retail sales of cannabis products continue to grow which gives us optimism for the long-term health of our industry. That said, we, along with all the companies in our industry, are in unchartered waters and we now face the uncertainties brought about by the coronavirus outbreak.”

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